General Electric Company (GE) proposed a bid for Honeywell International Inc (Honeywell) . GE is one of the largest and most diversified corporations, which generate revenues in segments as diverse as aircraft engines, plastics, and financial services. Honeywell is a diversified technology and manufacturing corporation leading in certain aerospace markets. It specializes in segments that include aerospace products and services, power generation systems and specialty chemicals. Honeywell's main group of businesses is a perfect fit for GE's major businesses (Aircraft Engines, Industrial Systems, Plastics, and Power Systems). GE's operating systems and social architecture, together with companies' common structure also match together.
GE formally announced the deal on October 22, 2000; in which GE offered 1.055 GE shares for each share of Honeywell, plus assumed dept. The company submitted the required regulatory fillings to the U.S. Department of Justice (DOJ) and notified the European Commission (EC) of the proposed merger. Antitrust regulatory authority of EC announced that it had initiated the review of the proposed merger. There are potential complications that might jeopardize this deal, mainly antitrust concerns in both United States and European Union, and additionally protectionist policies in the EU that would oppose increasing the power of major American firms.
Bancroft's Capital Management is an arbitrage fund with long arbitrage position by fund's 10 million shares in Honeywell and its short position of 10 million shares in GE, with 70 % invested capital borrowed at 15 % interest . It's necessary to decide wheatear it will sell or maintain its position in this companies, taking into account possible outcomes of EC investigation of the deal.
Statement of Goals.
In order to analyze Bancroft's Capital Management decision whether to hold or sell its fund's 10 million shares in Honeywell and its short position of 10...