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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (24169)	4/9/1998 9:40:00 PM
From: Satish C. Shah	Read Replies (3) \| Respond to of 97611

>>If he has to pay $100 for DEC then he pays 4 shares right now at $25. But if the share price is $33 then he only has to pay 3 shares>> I thought the deal was $ 30.00 cash and 0.945 share of CPQ (irrespective of the price of CPQ) for every share of DEC. Now on the day deal goes thru, if CPQ is trading at Case 1, $ 50.00, then cost of DEC to CPQ is $ 30.00 + 0.945 X 50 =$77.25 Case 2, $ 30.00, then cost of DEC to CPQ is $ 30.00 + 0.945 X 30 =$58.35 Now, on the acquisition day, when the accountants determine that actual value (cash, hardware, software, buildings and anything real) of DEC is, say, $ 50.00 a shares, then CPQ will have to carry on the books as goodwill, in case one, of $27.25 and in case two, that of $ 8.35. (goodwill = the price paid - the value received) In either case that goodwill has to be written off either a one time charge of $ 27.25 or $ 8.35 or has to be written off (depreciated) over the years. In either case, I rather right off $ 8.35 rather than $ 27.25. I am not an accountant or merger expert, but this is what Tandem did when they acquired Ungermann Bass. CPQ did not do this with Tandem because that was pooling of interest (no cash transaction), DEC is a buyout. Now, if you understand all this, please explain to me (I do not know what the hell I am talking about.) Regards and good luck to all Satish