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Stock prices of dow and roh

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Dow Chemicals' (DOW) acquisition of Rohm & Haas (ROH) in 2008: For this entire question use only the information given herein. Assume that the value of synergies is $5 billion. Disregard personal taxes. DOW has 936 million shares outstanding and ROH has 195.2 million shares outstanding. The pre-merger stock prices of DOW and ROH were $33.96 and $44.83 respectively.

A. Assume that DOW announces the offer to purchase ROH for $78 cash per ROH share. The post-announcement stock price of DOW and ROH is $32.52 and $73.62 respectively. Assuming that the final outcome of the offer will be known in 1 year and the one-year interest rate is 3%. What would be the strategy of a merger 'arbitrager' who believes that the deal will eventually be completed successfully as proposed?

Reference no: EM133059850

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