15 Jun Thermo Fisher paid $76 per share for each outstanding share of

Thermo Fisher paid $76 per share for each outstanding share of Life Tech. What is themaximum offer price Thermo Fisher could have made without ceding all of the synergy valueto Life Tech shareholders? (Hint: Using the Transaction Summary Worksheet, increase theoffer price until the NPV in the section entitled Valuation turns negative.) Why does the offerprice at which NPV turns negative represent the maximum offer price for Life Tech? Undochanges to the model before answering subsequent questions.2. Thermo Fisher designed a capital structure for financing the deal that would retainits investment grade credit rating. To do so, it targeted a debt-to-total capital andinterest coverage ratio consistent with the industry average for these credit ratios.What is the potential impact on Thermo Fisher’s ability to retain an investment gradecredit rating if it had financed the takeover using 100% senior debt? Explain youranswer. (Hint: In the Sources and Uses section of the Acquirer Transaction SummaryWorksheet, set excess cash, new common shares issued, and convertible preferred sharesto zero. Senior debt will automatically increase to 100% of the equity consideration plustransaction expenses.48) Undo changes to the model before answering subsequentquestions.3. Assuming Thermo Fisher would have been able to purchase the firm in a share for shareexchange, what would have happened to the EPS in the first year? Explain your answer.(Hint: In the form of payment section of the Acquirer Transaction Summary Worksheet, set the percentage of the payment denoted by “% Stock” to 100%. In the Sources and Usessection, set excess cash, new common shares issued, and convertible preferred shares to zero.)Undo changes made to the model before answering the remaining question.4. Mark Fisher, CEO of Thermo Fisher, asked rhetorically what if synergy were not realized asquickly and in the amount expected. How patient would shareholders be if the projectedimpact on earnings per share was not realized? Assume that the integration effort is far morechallenging than anticipated and that only one-fourth of the expected SG&A savings, marginimprovement, and revenue synergy are realized. Furthermore, assume that actual integrationexpenses (shown on Newco’s Assumptions Worksheet) due to the unanticipated need toupgrade and colocate research and development facilities and to transfer hundreds ofstaff are $150 million in 2014, $150 million in 2015, $100 million in 2016, and $50 million in2017. The model output resulting from these assumption changes is called the ImpairedIntegration Case.What is the impact on Thermo Fisher’s earning per share (including Life Tech) and theNPV of the combined firms? Compare the difference between the model “Base Case” andthe model output from the “Impaired Integration Case” resulting from making the changesindicated in this question. (Hint: In the Synergy Section of the Acquirer (Thermo Fisher)Worksheet, reduce the synergy inputs for each year between 2014 and 2016 by 75%and allow them to remain at those levels through 2018. On the Newco AssumptionsWorksheet, change the integration expense figures to reflect the new numbers for 2014,2015, 2016, and 2017.)