Interco

QUESTION 1

Hostile acquisition is the acquisition of one company (called the target company) by another (called the acquirer) that is accomplished not by coming to an agreement with the target company's management, but by going directly to the company's shareholders or fighting to replace management in order to get the acquisition approved.

Interco is a target of a hostile takeover directly because the board rejected the merger. Hostile takeover target usually can be sold out piece by piece. As is known by all, there are 4 highly separable parts ( apparel, footwear, furniture and general) in Interco, which are easy to be sold in part.

In terms of financial performance, Interco has low debt, low current ratio and is overcapitalized, which make hostile takeover more realizable.

QUESTION 2

It’s too low in general.

Reasons: 1 day prior premium is 17.9% and it’s lower than all.

Also, 4 week is 59.1% and is lower than 1Q & 2Q.

But during 3Q the price decreased compared to the first half of the year

QUESTION 3

Yes.

It uses industry average to estimate a fair firm value and breaks down value of firm to 4 parts-weighted average firm value. Thus comparable to the calculated value to $70 offer.

QUESTION 4

| Sales | Max V/S Ratio | Min V/S Ratio | Max Value | Min Value |

Furniture | 1,105.60 | 2.1 | 0.8 | 2321.76 | 884.48 |

Footware | 890.4 | 2.1 | 0.5 | 2321.76 | 552.8 |

Apparel | 813.2 | 0.9 | 0.4 | 995.04 | 442.24 |

General | 532.3 | 0.9 | 0.6 | 995.04 | 663.36 |

Total | | | | 6633.6 | 2542.88 |

Less: Debt | | | | 0.734249 | 0.734249 |

Ve | | | | 6632.865751 | 2542.145751 |

# Shares | | | | 36.183036 | 36.183036 |

$ per Share | | | 183.3142402 | 70.25794494 |

So the estimated Interco stock price per share using the smallest firm value-to-sales multiple estimate for each division is $70.25 per share, which is almost the same as the offer value. The offer price is too low and not attractive.

QUESTION 5

a....