PUBLIC PURCHASE OFFER -PUBLIC EXCHANGE OFFER AND METHODS OF EVALUATION : CASE OF THE CBM-WAFABANK FUSION

Abstract

By extending previous studies on public offerings, our research aims to demonstrate what the most relevant valuation methodologies could be used to ensure fair valuation of participating entities in a take-over bid (PAO) and public exchange offer (PEO) in the banking sector.While the legislation in force at the time of the merger strongly recommended the use of different methods to evaluate the two participating entities, the Commercial Bank of Morocco(CBM), the company initiating the public exchange offer (PEO), preferred choose only one, namely the average stock price.To best approach the problem, we testedthe main valuation methods, namely the asset-based approach, profitability approach, analogy and stock market approach in order to assess the fairness of the merger, namely acquisition between the CBMand Wafabank (WB). Using several methods makes it possible to better understand the evaluation because their implementation brings a lot of information and questions.The empirical results showed that despite the non-compliance with the regulations, the determination of the purchase price and the exchange ratio proposed by the CBM during the exchange was fair and equitable.

Keywords

• public exchange offer
• takeover bid
• financial evaluation
• exchange parity.