4.1 Calculate the combined value of the proposed acquisition. 4.2 Calculate the total number of shares in the proposed acquisition. 4.3 Determine the proposed post-acquisition market price per share. (2 decimal places) ) 4.4 Will the shareholders of Watford Refiners be happy with this price? Why?
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Watford Refiners is contemplating the acquisition of Surrey Ltd by means of a share issue. The combination of the two firms' operations will result in economies of scale and the additional value generated is estimated to be R20 million. The financial directors of the two companies have agreed to an equal split of this value between each firm's shareholders. It was also agreed that the purchase consideration for the Surrey Ltd acquisition should be based on an exchange of 1.25 shares of Watford Refiners for each share of Surrey Ltd.
Key acquisition data is detailed below:
Company No. of shares Price per share Earnings after Tax
Watford Refiners 8 million R12 R10 million
Surrey Ltd 5 million R9 R7 million
Required:
4.1 Calculate the combined value of the proposed acquisition.
4.2 Calculate the total number of shares in the proposed acquisition.
4.3 Determine the proposed post-acquisition market price per share. (2 decimal places) )
4.4 Will the shareholders of Watford Refiners be happy with this price? Why?
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