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Company C is a listed company.

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Company C is a listed company. It is currently considering the acquisition of Company D. The original founder of Company C currently owns 52% of the shares.

Alternative forms of consideration for Company D being considered are as follows:

• Cash payment, financed by new borrowing

• issue of new shares in Company C

Which of the following is an advantage of a cash offer over a share-for exchange from the viewpoint of the original founder of Company C?

A.

A share for share exchange would result in a significant change in control of Company C whereas a cash offer would not.

B.

A share-for-share exchange would require the approval shareholders in Company C but a cash offer would not.

C.

A share-for-share exchange would require the approval of the Competition Authorities but a cash offer would not.

D.

A cash offer would result in a lower gearing ratio therefore reduce the weighted overage cost of capital whereas a cash offer would not.

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