Which of the following defenses best describes the role of HiFly in the acquisition scenario?

Modern Auto, an automobile parts supplier, has made an offer to acquire Sky Systems,
creator of software for the airline industry. The offer is to pay Sky Systems’ shareholders the
current market value of their stock in Modern Auto’s stock. The relevant information it used
in those calculations is given below:
Modern Auto Sky Systems
Share price $40 $25
Number of outstanding shares (millions) 40 15
Earnings (millions) $100 $30
Although the total earnings of the combined company will not increase and are estimated
to be $130 million, Charles Wilhelm (treasurer of Modern Auto) argues that there are two
attractive reasons to merge. First, Wilhelm says, “The merger of Modern Auto and Sky
Systems will result in lower risk for our shareholders because of the diversification effect.”
Second, Wilhelm also says, “If our EPS increases, our stock price will increase in line with the
EPS increase because our P/E will stay the same.”
Sky Systems’ managers are not interested in the offer by Modern Auto. The managers,
instead, approach HiFly, Inc., which is in the same industry as Sky Systems, to see if it would
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be interested in acquiring Sky Systems. HiFly is interested, and both companies believe there
will be synergies from this acquisition. If HiFly were to acquire Sky Systems, it would do so
by paying $400 million in cash.
HiFly is somewhat concerned whether antitrust regulators would consider the
acquisition of Sky Systems an antitrust violation. The market in which the two companies
operate consists of eight competitors. The largest company has a 25 percent market share.
HiFly has the second-largest market share of 20 percent. Five companies, including Sky
Systems, each have a market share of 10 percent. The smallest company has a 5 percent
market share
A. Crown jewel.
B. Pac-Man.
C. White knight

Answer: C. White knight