1a. The value per share from synergies is around $15.92.
1b. While there are a number of synergies possible from this merger, $45m profit in synergies resulting from Gatorade’s warehouse distribution system seems high. It seems unlikely this distribution system would provide immediate access, economies and efficiencies to new customers, and it provides level of certainty that PepsiCo products could be exposed to potential new clients on a meaningful scale. $60m in synergies for procurement seems low because there may be more savings in the areas of procurement and purchasing where common raw materials might be used in similar products. $65m in synergies from better capacity utilization seems reasonable. $34m in synergies in distribution of Quaker Oats products through DSD channels also seems high because it is not confirmed that this would provide Quaker Oats access to new customers. Other foods synergies estimates based on 10% of Combined Pro-Forma sale seems low based on a number benefits attached to that arrangement.
1c. The acquisition will likely yield a labor (workforce) reduction in in the areas of Marketing, Accounting and Human Resources due to the possible duplication of work and inefficient use of resources. Any benefit obtained from such reductions must be valued. Additionally, access to new technology and research will likely enable both organizations to enjoy synergies in the form of large-scale cost savings and new product development.
1d. The value attached to the reduction of workforce and access to new technology should be more than $35m.
2. The Gatorade business in Quaker Oats is the most profitable due to its high appealing to young generation and athletes for gaining energy and preventing dehydration during the summer season. However, due to the limited reach of Quaker Oats products internationally, their combination with Coca Cola would prove beneficial because Coca Cola has the highest global presence due to its extensive distribution system. With the help of this system, Quaker Oats would gain synergy through making its presence in those areas where it is not in the position to reach and also it would bring economies of scale and capacity utilization in the form of cost savings. However, the figure for this synergy is more than $ 500 million, which seems to be reasonable if the Quaker Oats-Gatorade Product line appeals to Asian and other countries with hot and arid climates such as UAE.
3. Initial Proposal: Quaker Oats should be valued at $86 per share based on synergies and individual performance of the company; Quaker Oats top management would not be terminated or removed upon the successful completion of the merger; acquisition would be on a stock-to-stock basis, with two shares of PepsiCo exchanged for one share of Quaker Oats; Quaker Oats top management must be compensated for their assistance in achieving synergy benefits through their support and change management; annual dividends...