MGT 329, ACTIVITY-3

Three-year warrants to purchase Viacom ordinary stock at $60 each offer, and

Five-year warrants to purchase Viacom ordinary stock at $70 each offer.

The lion's offer of Paramount shareholders were excited about owning the shares of
a preoccupation blend or the supply of a takeover cheerful. While the Viacom typical
stock may have been of excitement to some of these shareholders, the tradable
debentures, the CVR and the two sorts of warrants would be soldwithout looking at
the go-between report and without appreciation to their genuine worth (They offer
without money related reason).

The Viacom stock issued to individuals when all is said in done as a significant part
of the merger contemplated triple the supply of Viacom stock visible to everyone
hands.

What is so much stuff? It was answered in "Key Merger Consideration".

Uniting the purchase of one offer of Viacom normal stock with the purchase of one
CVR made an exceptional theory opportunity. The CVR was a security issued by
Viacom to help guarantee the estimation of the back-end securities that Paramount
shareholders were to get in the merger. It was undoubtedly this confirmation of value
by Viacom that was responsible for its triumph in the offering war over Paramount.

The CVRs worked accordingly: If Viacom fundamental stock traded underneath $48
one year after the completing of the Paramount merger, Viacom would adjust for any
shortage through a portion to holders of the CVRs. (E.g., if Viacom stock traded at
$44 on the one-year recognition of the merger's close-by, Viacom would pay $4 for
each CVR; if Viacom traded at $38 Viacom would pay $10 for each CVR.

By purchasing one CVR for each offer of Viacom he asserted, a budgetary expert
could promise that the solidified estimation of the two securities would be at any rate

$48 in one year. If Viacom traded higher than $48 let's say to $55then,
disregarding the way that the CVR would be pointless, the joined estimation of the
two securities would be $55, far better than the guaranteed $48 cost. Since, not long
after the merger was done, one CVR and one offer of Viacom stock could be
obtained at a united expense of $37, a guaranteed expense of $48 in one year
looked truly incredible a 30% yearly return with little danger and no upside
repression.

Viacom compelled the payout on the CVRs to a most prominent of $12; even along
these lines, Viacom stock could tumble to $25 before a money related expert who
bought both the CVR and Viacom stock for a joined $37 would lose money. For
another, Viacom could extend the portion date of the CVRhowever just
consequently for a payout greater than $12.

I basically read the page in the mediator that let me know how they worked.
Regardless, I did have influence in this. It pays to take a gander at merger securities!

The five year warrants to buy Viacom stock at $70 each offer, looked particularly
captivating. These warrants gave the holder the benefit to buy Viacom stock at $70
each offer for a period of five years. Since Viacom stock was trading at about $32
each offer in July 1994, the benefit to buy Viacom stock at $70 didn't look
unreasonably enticing. On the other hand, with this sort of condition, I like to
consider the old story of the specialist who is passed on before the master and
sentenced to death. A ton can happen in a year.

The five year warrants gave the holder the benefit to buy Viacom stock at whatever
point in the midst of the accompanying five years for $70. Because of an ordinary
warrant, this could infer that the warrant holder was met all requirements for receive
one offer of Viacom fundamental stock consequently for $70 in genuine cash. The
$70 could be paid in genuine cash and there was nothing unpredictable about that.
Regardless, the $70 could in like manner be paid with $70 in face estimation of one
of the other Paramount merger securities. Which merger security? The tradable
subordinated debentures I determined before thing #2 on our summary.

Not long after the Paramount merger was done, these merger securities were trading
at 60% of their face regard. This inferred I could buy $70 of face estimation of these
securities for just $42 (60% of $70). I would reasonably have the benefit to buy

Viacom stock not for $70, but instead just $42 worth of merger securities. I would
have this a solid match for quite a while. Viacom was at $32. The benefit to buy stock
at $42 for quite a while was a ton more critical than the benefit to buy stock at $70. If
I hadn't read the portion of the mediator covering merger securities, there was no
chance I could have known this opportunity existed.