Draw the diagram for this claw-back provision

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On December 8. 2000, General Mills announced to acquire the worldwide business of Pillsbury from Diageo PLC. General Mills issued 141 million shares of its common stock to Diageo shareholders. There was following contingent payment by Diageo to General Mills. "At the closing, Diageo would establish an escrow fund of $642 mil. Upon the first anniversary date of the closing, Diageo was required to pay from this fund an amount to General Mills depending on General Mills' share price.

• $642Mil, if the average daily share price for 20 days was $42.55 or more

• $0.45 mil, if the average daily share price were $38 or less.

• Variable amount, if the average daily share price were between $38 and $42.55. Diageo would retain the amount by which $42.55 would exceed the average daily share price for 20days, times the amount of General Mill shares held by Diageo (141 million shares).

a. Draw the diagram for this claw-back provision.

b. What kind of option is it?

Reference no: EM13163456

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