Essay 1

1. You are required to critically evaluate the effect of Capital Structure and Cost of Capital upon the wealth returns that Bayer’s shareholders can expect when the a company engages in International Merger and Acquisition activity. Your answer should specifically relate to Bayer’s bid for Monsanto, and demonstrate an extensive engagement with appropriate academic literature. Students are expected to specifically comment on the method of funding for the Bayer’s bid and use academic literature to critically analyse the possible effects for the bid structure, and are expected to specifically comment on the method of financing specified in the below press release:

http://press.bayer.com/baynews/baynews.nsf/id/2016-0157-EN

Your essay should conclude by coming to a judgement as to whether or not Bayers’ shareholders should support the deal as one which would be wealth creating, or otherwise.

(50 Marks)
Essay 2

2. You are required to critically evaluate the ways in which Monsanto shareholders can first understand the value of the shares they own, and then use that evaluation to judge whether or not bids for those shares rationally and efficiently reflect ‘good value’ in a dynamic marketplace. Your essay should comment specifically on the section (below) of the article related to market price reactions to Bayer’s $56bn bid and display an extensive engagement with appropriate academic literature.
Bayer announced this week “advanced negotiations” and a sweetened offer of $127.50 a share, or $56 billion, as both sides seek to end more than three months of back-and-forth over price. The bid is 18 percent above Monsanto’s closing price on Thursday in New York and if successful, would lead to the biggest deal this year and largest ever by a German company.
Monsanto has been pushing for a price closer to $130 a share, according to people familiar with the matter. The companies are also discussing increasing the $1.5 billion break fee that Bayer would pay Monsanto if the deal doesn’t pass muster with regulators, one of the people said.