University Name - Analysis of the SPC Ardmona and CC Amatil Merger

This report provides an in-depth analysis of the merger and acquisition (M&A) between SPC Ardmona and Coca-Cola Amatil Limited. It begins by outlining the background of the deal, including the initial takeover bid, the offer price, and the arrangement scheme. The report then delves into the economic rationale behind the merger, examining the benefits for the target company (SPC Ardmona) shareholders, such as the opportunity to cash out at a profit, and the potential incentives for the acquiring company (CC Amatil). The analysis further explores the effects of the acquisition on CC Amatil, highlighting the changes in capital structure and the potential for increased indebtedness due to the all-cash deal. The report concludes by emphasizing the significance of M&A as a growth strategy, summarizing the key aspects of the SPC Ardmona and Coca-Cola Amatil transaction and the implications for shareholders.

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Background
SPC Ardmona group a canned fruit and vegetable company has agreed for a takeover
bid made by Coca-Cola Amatil Limited. The offer comes after a called off merger offer
between the company and National foods limited and the New Zealand dairy group wanted a
hostile takeover. The merger has an offer of $500 million as a compensatory package from
CC Amatil at $2.12 per share of SPC Ardmona share. The share were suspended and will
begin to trade at $1.78 when it resumes. The shareholders are entitled to receive $2.05 per
share and a dividend retention that is equivalent to three cents cash per SPC share. They can
alternatively opt to get CC Amatil shares which is possible under a scale back option. The
acquisition is subject to the approval from the courts and the shareholders of SPC Ardmona
(CARTWRIGHT, and Cooper, 2016).
A arrangement scheme is an agreement between the shareholders or creditors and the
company that is approved by the courts. The lenders and the shareholders may affect the
amalgamations and mergers due to their rights. The arrangement schemes are executed by
arbitrary changes in the company structures and are used to help in reorganization. The
merger and acquisition between SPC Ardmona and CC Amatil limited is an on-market bid.
The offer price per share to SPC shareholders is about $2.12 which is also the offer price for
the company shares. The type of shares in SPC are ordinary shares and the merger in this
transaction is based on cash deal only (Green, 2016). The shareholders are entitled to receive
$2.05 per share and a dividend retention that is equivalent to three cents cash per SPC share.

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https://www.google.com/search?q=mergers+and+acquisition+simulation&sxsrf
Target Company SPC Ardmona economic rationale to M & A
There is a substantial empirical evidence that shareholders of the target company
benefit substantially. The gains of the target company amount to 20 percent in mergers and
acquisitions and 30 percent in offer tenders above market prices that are prevailing a month
before the merger announcement. Mergers and acquisition may happen due to a decline in
business for the target company, or an increase in competitiveness in the industry (Lebedev,
Peng, Xie, and Stevens, 2015). M&A transactions for the target company SPC gives an
opportunity to cash out at a profit to the shareholder. This is true especially in a
transactionthat is all cash deal. If the acquire pays both in cash and stock, then the Target
company shareholder gets a stake in the acquired sand have a long-term vested interest in the
success of the company.
Economic rationale behind the Acquirer Company CC Amatil Limited
The gains to the acquiring firm are not easy to measure. In fact, many analysts suggest
that shareholders in bidding firms gain very little of insignificantly. There are losses in value
that is subject to the merger announcements and this is not unusual. Overvaluation by the

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bidding firm to the target firm is very common (Nelson, 2018). The managers of the bidding
firm or the acquirer may have incentives that may increase the size of the firm at the expense
of the value of the shareholders wealth. Merger and acquisitions in this case may occur for
non-economic reasons to the shareholders detriment.
https://www.google.com/search?q=mergers+and+acquisition+simulation&sxsrf
Effects of the acquires CC Amatil are more significant than the target company. The
bigger the target company, the higher the acquirers risk. A company can withstand the
failure of a small-sized company than a huge purchase company failure. Once a merger and
acquisition transaction is closed, the capital structure of the acquirer will change depending
on the merger and acquisition structure and design (Sarala, Junni, Cooper, and Tarba, 2016).
An all cash deal will deplete the reserves of the acquirer or deplete the cash holdings of the
acquirer. Cash deals payment plans are often financed through a bank loan or a long-term
debt acquired by the acquirer to make full payments to the target firm. This may also increase
the company’s indebtedness which means that there may be a higher debt load justified by
cash flows that may be contributed by the acquired or targeted firm (Schmidt, 2015).
Conclusion
Mergers and acquisition are considered an avenue to economic growth and a strategy
for growth in many businesses. SPC Ardmona group a canned fruit and vegetable company

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has agreed for a takeover bid made by Coca-Cola Amatil Limited. The target company will
use the money to pay its shareholders after the cash deal while other will be compensated
through shares of the acquiring company.

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References
CARTWRIGHT, S.C. and Cooper, C.L., 2016. Managing mergers acquisitions and strategic
alliances. Routledge.
Green, M.B., 2016. Mergers and acquisitions. International Encyclopedia of Geography:
People, the Earth, Environment and Technology, pp.1-9.
Lebedev, S., Peng, M.W., Xie, E. and Stevens, C.E., 2015. Mergers and acquisitions in and
out of emerging economies. Journal of World Business, 50(4), pp.651-662.
Nelson, T., 2018. Mergers and Acquisitions from A to Z. Amacom.
Sarala, R.M., Junni, P., Cooper, C.L. and Tarba, S.Y., 2016. A sociocultural perspective on
knowledge transfer in mergers and acquisitions. Journal of management, 42(5), pp.1230-
1249.
Schmidt, B., 2015. Costs and benefits of friendly boards during mergers and
acquisitions. Journal of Financial Economics, 117(2), pp.424-447.