How will the merger affect the pricing power

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The stocks of Walker Industries have gained considerably following the announcement of a merger with Vicenza Inc. Walker Industries is a family-owned firm that has been in the diamond jewelry business for decades. Vicenza is a luxury jewelry company that also has several fashion labels. In response to queries from the media, John Antonio, a spokesperson for Vicenza, says that the merger will not violate any antitrust laws and will lead to efficiency gains for both firms. Maria Crusoe, a business reporter, claims that the merger will result in even higher diamond prices for consumers.

Which of the following questions would be most important to answer in order to determine whether Maria’s claim is accurate?

a. How will the merger be financed and how will the mode of financing affect dividends paid to shareholders?

b. Are consumers expecting an increase in the price of diamonds?

c. How will the merger affect the pricing power of Vicenza’s fashion labels?

d. What is the combined market share of the merged entity in the diamond jewelry market?

e. What is the percentage change in the share prices of the two companies after the announcement of the merger?

Reference no: EM131091842

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