TOPIC: Mergers and Acquisitions, Hostile Takeovers, Dropped Takeover Bids

SOURCE: "Hasbro Faces New Struggles Post-Mattel," by Andy Pasztor, Joseph Pereira, and Steven Lipin, Wall Street Journal, February 6, 1996, A3-A4.

SYNOPSIS: The article describes the announcement by Mattel that it is dropping its effort to acquire Hasbro at a 73 percent premium. Hasbro's stock price fell by 15 percent upon the announcement. The tactics used to fight off the merger offer, and the pressure placed on Hasbro to now increase its stock price, are discussed.

DISCUSSION QUESTIONS:

1. How would you classify the economic type of this merger? What is the source of the 73 percent increase in Hasbro's value?

2. Why would Mattel offer an initial premium of 73% for Hasbro?

3. How did Hasbro management convince Mattel to drop its bid? Was this good for Hasbro's shareholders?

4. After the dropped bid by Mattel, why did Hasbro's stock price not drop to its level prior to the bid being announced?

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