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C)Since the approach to Nente Co, Mije Co has itself been the subject of a takeover bid from
Tianhe Co, a listed company which specialises in supplying machinery to the manufacturing sector.answer:Attempting to have the bid referred to the competition authorities seems unlikely to be
successful, based on the size of Mije Co, and because this is a vertical merger rather than a
horizontal one – which means Tianhe Co is unlikely to significantly increase its existing market
share.sir why this take over is a vertical merger, and why it wont add any value to the existing market share?
sir i have another question that is from,
b) how to understand that the The follow-on product is an option to delay?The original exam question did not have a part (c) – BPP have added it.
However, Tianhe specialises in supply machinery whereas Mije does not make machinery – they develop tools and parts for the machinery. So they are not competing and it is a vertical merger in that Mije would supply Tianhe.
It is an option to delay because they do not have to commit to producing the follow-on product immediately but can wait before making the decision.
thanks sir, i had another question from here, In part a) appendix 3 in the value of follow on product, my question from here is that why they took Time to expiry of option: 2yrs rather than 5yrs?
In the first sentence under the heading ‘Proposal 2’ in the question, it says the have the right to produce the follow-on product within 2 years. So the option will have to be exercised within 2 years.
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