Case ID: 208062
Solution ID: 1150
Words: 1671
Price $ 45


Case Solution

AXA is the world’s largest insurance group that wants to acquire MONY, a life insurance company in US. The purpose of the acquisition for AXA is that MONYs operations in the US would complement the products and the geographical regions that AXA serves in the US. AXA offered $31 as the acquisition price per share to the MONY shareholders, which was the consensus of the analysts as the fair price for MONY too. The shareholders at MONY are skeptical as to the offered price and the manner in which the management & board has accepted the offer. AXA is financing the $1.5 billion merger through a debt offering to its own shareholders in which they have an option of converting their debts into shares once the deal emerges in time.

Excel Calculations

Questions Covered

1. Why is AXA bidding for MONY? Does the deal make sense: (a) for AXA; (b) for MONY shareholders; (c) for management? AS a MONY shareholder, what concerns would you have about the deal?

2. How did AXA finance the takeover bid? Explain the structure that they used. Why did they use this structure? What effects, if any, do you think this method of financing has on the likelihood of the deal succeeding?

3. How would you price the ORAN at issue? Is it fairly priced? What does the price of the ORAN on February 9, 2003, imply about the probability of the deal suc-ceeding? What is the fair price for MONY stock?

4. Suppose that you hold a position in the ORAN on February 9. Would you want to buy or sell MONY stock (a) at the “fair” price calculated in question 3 above or (b) at the market price of $31.55? How do you explain the price of MONY stock on February 9?

5. Suppose that you are the manager of a $2bn hedge fund with a significant stake in MONY and that on February 10 you receive a phone call asking to buy your stock at above the market price if you sign over the voting rights with the shares. What considerations would enter into you decision about whether to sell your MONY stock at $31.55 on February 9?