A company proposes a buyback of its shares in exchange for 3-year inflation-indexed bonds that would carry a convertible option

A company proposes a buyback of its shares in exchange for 3-year inflation-indexed bonds that would carry a convertible option. The conversion option entitles a bond holder to accept the buyback in terms of repayment proceeds of the bond or in terms of two equity shares for every bond held. The investment banker is hailed by the market as a brilliant banker and the offer is over-subscribed. The CFO is unhappy and cites a huge regulatory liability on the company but is not sure about it. Is the offer valid?

(a) Yes          (b) No