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3. Using the data given below, calculate fully diluted shares. Assume the firm uses proceeds received...

3. Using the data given below, calculate fully diluted shares. Assume the firm uses proceeds received from the conversion of options to common shares to repurchase as many of these new shares as possible. Calculating Fully Diluted Shares Outstanding $Million, except per share data, shares in millions

Current Share Price $35.00

Basic Shares Outstanding 157.00

Options that can be Exercised 35.0

Weighted Average Exercise Price $18.00

Find total shares outstanding (basic shares plus new option shares).

4. What is the fully diluted offer price (equity value) for a tender offer made to acquire a target whose pre-tender shares are trading for $1.62 per share? The tender offer includes a 25% premium to the target’s pre-tender share price. The target has basic shares outstanding of 85 million and 5 million options which may be converted into common shares at $1.85 per share?

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Answer #1

Soln : 3) No. of basic shares outstanding = 157.00million , current stock price = $35

So, total value of basic shares = 157 *35 = $5495 million

Options that can be exercised = 35 million, strike price of option = 18

Value of the shares attached with conversion of option = 35*18 = $ 630 million

Total shares outstanding in $ million = 630 + 5495 = $ 6125 million

4) Total value of the option shares if executed = 1.85* 5 mn = $ 9.25 million

Value of Basic shares outstanding = 85*1.62 = 137.70 million

Total no. fo shares outstanding after conversion = 85+5 = $90 million

So, premium paid = 90*1.62*0.25 = $36.45 million

Fully diluted offer price should be = 9,25+137.7 + 36.45 = $183.4 million

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