It makes the whole argument so much simpler, so much cleaner, and I hope will help people reach a better deal. Before the merger, the Planet is half the size of the Gazette, and the Planet is worth ten million. The Gazette is worth 22 million. If they merged, there's lots of things they can do together. They can save money through joint purchasing, through knowledge transfer, through reduced overhead, and by giving each other readers. So let's look at them line by line. There's 6 million of potential savings through joint purchasing. And the Gazette says, hey, I'm twice as big as you and so I want 4 million of the savings, you can have 2 million of the savings. Hm. The next line is there's 1 million in know-how. That is the Gazette runs a more efficient operation than the Planet. And by the way, that's why the Gazette is worth a little bit more than the Planet on a per reader basis. So the Gazette can help the planet save $1,000,000 and the Gazette says I want all of that million because it's really my knowledge, my know how. You can't do that without me. The next line is there's 1.2 million they can save through reduction and overhead. And here, it's not clear how you should divide it up and so the gazette proposes, let's just split it in proportion to our market caps. The sum of our market caps, the stock value of the company, is $32 million, mine's 22, so I'd like 22 over 32 of that $1.2 million savings. You can have 10 over 32 of that $1.2 million savings. The last potential reason for coming together is their synergy they can create by bringing readers to each other. The Gazette can bring 10,000 readers to the Planet, and the Planet can bring 5,000 readers to the Gazette. The Gazette says the following, I'd like the value of the readers that I'm bringing to you, and in return you can have the value of the readers you bring to me. So, I’m bringing you 10,000 readers, that’s worth 1.1 million. You can have the value of the 5,000 readers you bring to me, that's $550,000. I'd like to think that prior to this course, the type of arguments you just heard are the ones you might have made. They all seem kind of fair. We're talking about proportional division here in various ways. Or you're getting what it is that you bring to the table. Now with the perspective of the pie, I'd like to think that you'd make some very different arguments in this case. So let's go back to the first slide, the savings from joint purchasings. There's $6 million to be saved. If I was the Planet, I'd come back and say, hey without me, you can't get that 6 million. So I don't wanna divide it four and two I want to divide it 3 and 3. And frankly, there's really not a great counter to that. Now let's look at the next line. The idea that the Gazette should get the $1 million it brings to the table because it has all the know-how. How do you counter that as the Planet? You could say, well again, if we don't do this deal that million dollars disappears, but I think you can do an even more specific argument. And here's a way of having a little bit of fun with it. As the Planet you could say, you know your know how is great, but without my inefficiencies, actually it doesn't do anything. So you need my operations In order to have the value of your know-how. Only by bringing your know-how to our old-fashioned ways of doing things can we create the million dollars worth of savings, and so that's why we should split it. In fact, actually I'd like it all, but I'm willing to share it half with you. The same argument is certainly gonna apply to the savings from reduced overhead, the 1.2 million. And let's look at the last line, the idea that the Gazette should get the value of the readers it brings to the Planet, while the Planet should get the value of the readers it brings to the Gazette. While that looks like it's symmetric and fair, I don't think so. Here instead is the argument I think the Planet should make. Well, thank you very much for the 10,000 readers you're bringing to me. What I'm giving those people is something to read, and so I want to split the value of the 10,000 readers you're bringing to me because I need the readers and you need the content. And in return, I'll split the value of the 5,000 readers I bring to you. I'll get the half from bringing the readers, you'll get the half from bringing the content. And you can see that when we add all this up, rather than think about an argument line by line, how much we should share, the joint purchasing, the reduced overhead, the technology transfer. The new readers instead just say This deal creates $9.85 million of value. We need each other equally to make this deal happen, so let's just split it 50-50. It makes the whole argument so much simpler, so much cleaner, and I hope will help people reach a better deal.
