ADVANCED FINANCIAL STRATEGIES

Advanced Financial Strategies

Advanced Financial Strategies

Case 11-1

Phelps Dodge Attempts to Buy Two at the Same Time

In this case, Phelps came up with a plan of the merger and acquisition of three companies in a three-way transaction. The transaction supposed to be carried out in two steps. In the first step, Inco would acquire Falconbridge by offering a combination of Inco cash and shares. Later, in the next step, Phelps would acquire Inco-Falconbrigde. The deal seemed to be very promising on the paper as the parties intended to recover the premium by excessive cost savings that would result from the merger of the operations. Further, Phelps aslos anticipated buying-back its shares of worth $5 billion. In order to finance the deal and transaction, Phelps had to borrow more than $27 billion.

According to the proposed complex plan of Phelps Dodge, the deal of Phelps acquiring Inco was not contingent upon successful acquisition of Falconbridge by Inco. Therefore, when the time arrived for the execution of the plan, Xstrata came forward and got succeeded in acquiring Falconbridge. This resulted in the declined prices of Phelp's share price. The expected yearly cost-savings lowered down to $350 million which initially estimated at $900 million.

As per the plan, Phelps had already decided that the plan would continue even in the case of losing the acquisition of Falconbridge by Inco. Therefore, Phelps continued with the plan of acquiring Inco. Losing the Falconbridge did make the expected annual cost-saving fall, but still there was an enormous cost-saving if it continued to acquire Inco (ASpatore, 2006).

Case 11-4

Here, Chevron is using the form of payments as a potential takeover by the use of mix stock and cash as Mergers and Acquisitions also known by its acronym in English, "M & A" refers to an aspect of corporate strategy, general management ...