Homework answers / question archive / Company A is an unlisted holding company and is in need of capital

Company A is an unlisted holding company and is in need of capital

Accounting

Share With

Company A is an unlisted holding company and is in need of capital. Company B which is its listed subsidiary, has a problem of excess free cash flow. The CFO of Company A proposes a preferential offer to Company B. The CFO of Company B proposes a high dividend distribution. The financial adviser of the group suggests that there should be a share repurchase by Company B. The tax advisor to the group says that Company B should be merged with Company A. The Chairman of Company A fears that this would lead to a back-door listing of Company A. Since they could not agree on the offer formulation, they engage an investment banker who advises that a separate SPV should be floated in which both the companies are equal shareholders. Which of the following alternatives is the most tax efficient and also meets the strategic requirement?

(a) Advice of CFO of company A (b) Advice of CFO of company B

(c) Advice of Group Financial Adviser (d) Advice of Group Tax Adviser

(e) Advice of Investment Banker