Question

An acquirer has an issued capital of 300 million shares trading at $6.01. A target company has an issued capital of 500 million shares trading at $2.95. The acquirer expects synergies from an acquisition with a present value of $300 million and offers target company shareholders 0.5 acquirer shares for each target company share. What is the likely post-announcement price of target company stock (to two decimal places)?

Answer #1

Informations given:-

Number of shares in acquiring company= 300 m

Value per share of acquiring company= 6.01

Number of shares in target company= 500 m

Value per share of target company= 2.95

Synergy due to aquisition = 300 m

Now we can find the value of acquiring company and target company as follows:-

Value of acquiring company (Va)=

300*6.01= 1803

Value of target company (Vt)= 500*2.95= 1475

Number of shares issued by acquiring company to target company= 300*0.5 = 150 m

Total number of shares after acquisition = 300+150= 450 m

Post merger share price = (Va+Vt+Synergy)/total number of shares after merger

= 1803+1475+300/300+150

= 7.95

Each one share of acquiring company is equal to 0.5 shares of targeting company, so price of targeting company shares after maerger

= 7.95*0.5 = 3.975

... hope you are satisfied with the solution provided kindly support me by rating the answer..

An acquirer has an issued capital of 300 million shares trading
at $6. A target company has an issued capital of 500 million shares
trading at $3.04. The acquirer expects synergies from an
acquisition with a present value of $300 million and offers target
company shareholders 0.49 acquirer shares for each target company
share. What is the likely post-announcement price of target company
stock (to two decimal places)?

An acquirer has an issued capital of 300 million shares trading
at $6.16. A target company has an issued capital of 500 million
shares trading at $3.05. The acquirer expects synergies from an
acquisition with a present value of $200 million. What is the
maximum exchange ratio (to two decimal places) that could be
offered in a stock swap and still generate a positive-NPV for the
acquirer?

Company A has 10 million shares trading at a price of $9m, as
investors view it should be $10 or $8 with equal probabilities.
However, its management knows the true value per share is $10. The
company is planning the acquisition of company T, which has 4
million shares trading at $15. Advisors tell company A it will have
to pay a 20% premium for company T's shares over their current
price. The acquisition would create synergies worth $15m. If...

Ostea Inc. is a publicly traded beverage company with 20 million
shares, trading
at $50 a share, and $400 million in debt.
The current cost of capital is 11%.
Ostea plans to borrow $300 million and buy back stock.
It expects its cost of capital to drop to 9%, if it does so.
Assuming that investors are rational and that savings from the
lower cost of capital will grow 2.75% a year in perpetuity, how
many shares will Ostea be...

Shown below is certain data for the Buyer and Target firms.
Buyer Target
Standalone value $1,200 $ 300
Shares Outstanding 10 50
Buyer estimates the present value of synergies as $100. Buyer
makes an all cash offer $450 for the stock of Target.
Calculate:
The gain for buyer (deal NPV)
The gain for the target (deal NPV)
Buyer's post-acquisition stock price per share

Your company has earnings per share of $4. It has 1 million
shares outstanding, each of which has a price of $39. You are
thinking of buying TargetCo, which has earnings of $1 per share,1
million shares outstanding, and a price per share of $23. You will
pay for TargetCo by issuing new shares. There are no expected
synergies from the transaction. Suppose you offered an exchange
ratio such that, at current pre-announcement share prices for
both firms, the offer...

Your company has earnings per share of
$5.
It has
1
million shares outstanding, each of which has a price of
$44.
You are thinking of buying TargetCo, which has earnings of
$3
per share,
1
million shares outstanding, and a price per share of
$26.
You will pay for TargetCo by issuing new shares. There are no
expected synergies from the transaction. Suppose you offered an
exchange ratio such that, at current pre-announcement share
prices for both firms, the...

Your company has earnings per share of $5. It has 1 million
shares outstanding, each of which has a price of $39 . You are
thinking of buying TargetCo, which has earnings of $1 per share,
1 million shares outstanding, and a price per share of $23. You
will pay for TargetCo by issuing new shares. There are no expected
synergies from the transaction. Suppose you offered an exchange
ratio such that, at current pre-announcement share prices for
both firms,...

Your company has earnings per share of $ 4. It has 1 million
shares outstanding, each of which has a price of $ 38. You are
thinking of buying TargetCo, which has earnings of $ 3 per share,
1 million shares outstanding, and a price per share of $ 20. You
will pay for TargetCo by issuing new shares. There are no expected
synergies from the transaction. Suppose you offered an exchange
ratio such that, at current pre-announcement share prices...

Your company has earnings per share of $ 4. It has 1 million
shares outstanding, each of which has a price of $ 40. You are
thinking of buying TargetCo, which has earnings of $ 2 per share,
1 million shares outstanding, and a price per share of $ 25. You
will pay for TargetCo by issuing new shares. There are no expected
synergies from the transaction. Suppose you offered an exchange
ratio such that, at current pre-announcement share prices...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 7 minutes ago

asked 9 minutes ago

asked 14 minutes ago

asked 36 minutes ago

asked 44 minutes ago

asked 48 minutes ago

asked 48 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago