cash vs total considerations

问题如下：

Stratton Oil Corporation is a publicly traded, US-based energy company that just announced its acquisition of Midwest Oil Corporation, a smaller US-based energy company. Stratton will pay USD55 in cash and 2.25 Stratton shares for each Midwest share, for a total consideration of USD40 billion based on share prices just prior to the announcement. Stratton’s current trading enterprise value just prior to the announcement was USD170 billion. Lee concludes that the acquisition does not signal a change in strategy or focus for Stratton.

Lee’s junior analyst makes the following comment during a conversation with Lee:

The acquisition is considered immaterial in the initial evaluation step for Stratton because it does not signal a change in strategy or focus.

Lee’s junior analyst’s comment about materiality is:

选项：

correct.

incorrect because the acquisition is considered a small acquisition.

incorrect because the acquisition represents more than 10% of Stratton’s enterprise value prior to the transaction.

解释：

C is correct. Materiality can be defined along two dimensions: size and fit. Although the acquisition does not signal a change in strategy or focus for Stratton, the transaction is considered large and material because it exceeds 10% of Stratton’s enterprise value prior to the transaction. The total consideration is USD40 billion, based on share prices just prior to the announcement; thus, it represents 23.5% of Stratton’s enterprise value just prior to the announcement of USD170 billion.

A is incorrect because materiality can be defined along two dimensions: size and fit. Although the acquisition does not signal a change in strategy or focus for Stratton, the transaction is considered large and material because it exceeds 10% of Stratton’s enterprise value prior to the transaction.

B is incorrect because the transaction is considered large and material because it exceeds 10% of Stratton’s enterprise value prior to the transaction.