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Consider the following information about Firm A and Firm T:
|
Item |
Firm A (Acquiring firm) |
Firm T (Target firm) |
|
Price per share |
$20 |
$15 |
|
Outstanding shares |
50 |
25 |
|
Total market value |
$1000.00 |
$375
|
Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the merger premium?
$150.00
$135.00
$125.00
$175.00
Step by step
Solved in 3 steps
- Consider the following information about Firm A and Firm T: Item Firm A (Acquiring firm) Firm T (Target firm) Price per share $20 $15 Outstanding shares 50 25 Total market value $1000.00 $375 Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the NPV of the acquisition to firm A? Select one: a. $1075.00 b. $575.00 c. $425.00 d. $555.00Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding Price per share 6,000 1,200 $ 47 $ 17 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $9,500. a. If Firm T is willing to be acquired for $19 per share in cash, what is the NPV of the merger? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $19 per share in cash, what is the merger premium? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for…Consider the following data in relation to a proposed acquisition, where Firm B will take over Firm A in a horizontal takeover. Pre-merger Value A $600m Pre-merger Value B $475m Post-merger Value A + B $1,200m Cash Offer $630m Share Offer 53% of Shares in A + B a. Estimate the gains available from the merger. b. Estimate the value of the merger to firm A’s shareholders under both the cash and share offer. c. Estimate the value of the merger to firm B’s shareholders under both the cash and share offer. d. Which offer will predominate, cash or shares, if the shareholders of A are given the choice?
- Consider the following data in relation to a proposed acquisition, where Firm B will take over Firm A in a horizontal takeover. Pre-merger Value A $550m Pre-merger Value B $420m Post-merger Value A + B $1,150m Cash Offer $580m Share Offer 52% of Shares in A + B Estimate the gains available from the merger. Estimate the value of the merger to firm A’s shareholders under both the cash and share offer. Estimate the value of the merger to firm B’s shareholders under both the cash and share offer. Which offer will predominate, cash or shares, if the shareholders of A are given the choice?Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share $ 48 $ 19 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900. a. If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger? b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium? d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2…Consider the following information for the two companies, SpaceC and Alexa: SpaceC Alexa Shares outstanding 100 50 Price per share $50 $30 SpaceC is considering acquiring Alexa. It estimates that in doing so the synergistic benefit would be $200. Alexa says that it would accept an offer to be sold at $35 per share. Should SpaceC proceed and purchase Alexa? At what price would SpaceC be indifferent to making the acquisition of Alexa? Assuming the acquisition was at $35, what level of synergies (not $200) would there have to be to make the acquisition make sense for SpaceC? ( explain perfectly with step by step and type the answers) .
- The following data are pertinent for companies A and B. A B Present Earnings Shs 20 million Shs 4 million No of shares Sh10 million Sh 1 million Price/earning ratio 18 10 (a) If the two companies were to merge and the exchange ratio were one share of Company A for each share of Company B, what would be the initial impact on earnings per share of the two companies? what is the market value exchange ratio? Is the merger likely to take place? (b) If the exchange ratio were two shares of Company A for each share of Company B what would happen with respect to the above? (c) If the exchange ratio were 1.5 shares of Company A for each share of Company B, what would happen? (d)What exchange ratio would you recommend?Prior to a potential merger Ross Co has 4500 shares outstanding at a market price per share of $31. Bulbs Inc has 2,800 shares outstanding at $18 per share. Assume Ross Co has estimated the valueof the synergistic benefits from acquiring Bulb Inc to be $3,500. Nowther firm has outstanding debt. The acquiring firm offered a price of $19.75 per share to the target. If the deal goes through, what is the merger premium? A) 4900 B) 3500 C) 2800 D) 6125 E) 0Kunla Ltd and Cunta Ltd intend to merge. The following were observed just before the merger announcement. Kunla Ltd Cunta Ltd Market price per share GH¢ 400 GH¢200 Number of shares 2,000,000 1,000,000 Market value of firm GH¢ 800,000,000 GH¢ 200,000,000 The proposed merger will create GH¢50,000,000 in synergies. Kunla Ltd intends to pay GH¢ 130,000,000 cash for Cunta Ltd. What is the cost of the merger to Kunla Ltd? Compute the NPV of the merger. The managers of these firms have proposed to merge to diversify their activities and to reduce risk. Should you pay a premium for the merged firm? What convincing reasons can these managers give for the proposed merger? What roles do investment banks play in facilitating M&A deals?
- A merger between Minnie Corporation and Mickey Corporation is under consideration. The financial information for these firms is as follows: Minnie Corporation Mickey Corporation Total earnings $1,682,000 $2,581,000 Number of shares of stock outstanding 290,000 890,000 EPS $5.80 $2.90 P/E ratio 10X 20X Market price per share $58 $58 a. On a share-for-share exchange basis, what will the postmerger EPS be? (Round the final answer to 2 decimal places.) Postmerger earnings per share $ b. If Mickey Corporation pays a 25 percent premium over the market value of Minnie Corporation, how many shares will be issued? (Do not round intermediate calculations.) Shares issued shares c. With the 25 percent premium, what will the postmerger EPS be? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Postmerger earnings per share $Calculate the post-acquisition increase/decrease price of the share if Tim Limited acquires Polo Limited forR45 million. Assume that Tim Limited has 7 million shares with a market price of R7.00 per share and Polo Limitedhas 5 million shares with a market price of R5.00 per share. The synergy of this merger is R11 million.Firm B Firm A $ Firm AB Price Per Share Total Earnings (millions) Shares Outstanding (millions of shares) Total Value (millions) 75 $ 40 $ 300 $ 200 200 60 $ 15,000 $ 2,400 $ 20,000 Firm A has proposed to acquire Firm B at a price of $65 per share for Firm B's stock. a) What is the NPV of the merger to Firm A? What is the NPV of the merger to Firm B? b) What will be the post-merger price per share for Firm A's stock if Firm A pays in cash? c) To make the value of a stock offer equivalent to a cash offer of $3,900 million, how many shares should Firm A give to the owners of Firm B?
