Reference no: EM132920554

Question - AGold Ltd is a gold exploration company with interest in Western Australia and Papua New Guinea. On 1 March 2010, AGold was listed on the Australian Securities Exchange. On 1 February 2015 AGold Ltd acquired a 5% interest in Goldilocks Ltd. The main operation of Goldilocks Ltd is gold mining in Prominent Valley. By 30 June 2019, AGold Ltd has accumulated 25% of the shares in Goldilocks Ltd, giving it significant influence.

In January 2020, Mrs Cusack, the CEO of AGold, presented her strategic plan to the board of directors, consisting of eight board members. Four of the board members are independent. Mrs Cusack, proposes that AGold Ltd makes a number of acquisition as part of its growth strategy. The acquisitions will strengthen AGold Ltd position in the Metals and Mining industry and create synergies. The board of directors are impressed with Mrs Cusack's proposal, as according to the financial forecasts, the acquisitions are expected to generate significant returns to the shareholders. On 1 July 2020, AGold Ltd makes a formal takeover offer for the remaining 75% shares in Goldilocks Ltd using an off-market bid. The takeover offer is as follows:

Three shares in AGold Ltd for every two shares on Goldilocks Ltd, and $0.25 cash for every eight shares in Goldilocks.

At the date of the takeover offer:

Goldilocks Ltd has 350,677,530 shares on issue.

Goldilocks Ltd reported a net profit of $133,000,000 and paid dividend of $50,000.

The Owner's equity account of Goldilocks was $580,887,000.

All the net assets of Goldilocks were at fair value except for inventory, which was recorded at $67,000 below its fair value.

At the date of acquisition, the share price of Goldilocks Ltd and AGold Ltd are $4.50 and $1.25, respectively.

The board of directors Goldilocks Ltd have also received a competing offer from TwinkleGold Ltd. On 15 July 2020, the board of Goldilocks released a target statement and recommended that the shareholders accept the takeover offer from AGold Ltd.

The deal value is $529,515,000.

AGold Ltd has an existing toehold (existing share ownership) of 25% in Goldilocks Ltd.

The market-to-book ratio of Goldilocks Ltd and AGold Ltd are 2.6 and 3.1, respectively.

The ROE of Goldilocks Ltd and AGold Ltd are 0.11 and -0.08, respectively.

Both firms are audited by a Big4 auditor.

1. Is the takeover offer likely to be successful?