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CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Advanced Financial Management

Case: Kaveri Foods Ltd is considering acquiring Malabar Spices Ltd through a purchase of its business in which Malabar's shareholders keep no stake in the combined entity, and Kaveri pays cash. Which term best describes the nature of this restructuring from Malabar shareholders' perspective, in the context of corporate restructuring?

It is a cash-out takeover, meaning an acquisition for cash. Malabar's shareholders receive cash and have no continuing ownership in the combined entity, unlike a share-exchange merger. Demerger and reverse merger describe different structures, so they do not fit.

  1. ADemerger
  2. BCash-out takeover (acquisition for cash)Correct
  3. CReverse merger
  4. DManagement buy-in through ESOP

Explanation

When the acquirer pays cash and target shareholders exit with no continuing interest, it is a cash acquisition (cash-out). Demerger splits a company, reverse merger involves a smaller or unlisted acquirer absorbing a bigger entity, and ESOP buy-in is unrelated.

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