Pipe Corporation is interested in acquiring all of Ore Corporation. It currently owns 30% of the outstanding Ore stock, which it purchased six years ago for $250,000. Pipe is a manufacturer of plumbing pipes with assets valued at
$3 million and liabilities of $1 million. Ore supplies Pipe with copper from its mines that are valued at $4 million with
$3 million in mortgages. Pipe negotiates the restructuring with Ore's management. Pipe is concerned about potential environmental issues from the strip mining used by Ore and feels it needs liability protection.
a. Given these facts, what type of reorganization would you suggest for Pipe and Ore?

b. Provide a diagram of the reorganization you suggest.

Question

Pipe Corporation is interested in acquiring all of Ore Corporation. It currently owns 30% of the outstanding Ore stock, which it purchased six years ago for $250,000. Pipe is a manufacturer of plumbing pipes with assets valued at
$3 million and liabilities of $1 million. Ore supplies Pipe with copper from its mines that are valued at $4 million with
$3 million in mortgages. Pipe negotiates the restructuring with Ore's management. Pipe is concerned about potential environmental issues from the strip mining used by Ore and feels it needs liability protection.
a. Given these facts, what type of reorganization would you suggest for Pipe and Ore?

b. Provide a diagram of the reorganization you suggest.

Quizplus · Accepted Answer

The Answer of Pipe Corporation is interested in acquiring all of Ore Corporation. It currently owns 30% of the outstanding Ore stock, which it purchased six years ago for $250,000. Pipe is a manufacturer of plumbing pipes with assets valued at
$3 million and liabilities of $1 million. Ore supplies Pipe with copper from its mines that are valued at $4 million with
$3 million in mortgages. Pipe negotiates the restructuring with Ore's management. Pipe is concerned about potential environmental issues from the strip mining used by Ore and feels it needs liability protection.
a. Given these facts, what type of reorganization would you suggest for Pipe and Ore?

b. Provide a diagram of the reorganization you suggest.

Pipe Corporation Is Interested in Acquiring All of Ore Corporation