Orion plc is determined to report earnings per share of 267p. It therefore acquires Mintaka plc....

Orion plc is determined to report earnings per share of 267p. It therefore acquires
Mintaka plc. There are no gains associated with the acquisition. In exchange for
Mintaka’s shares, Orion issues just enough of its own shares to ensure its 267p
earnings per share objective.
Please find the following information:
OrionMintaka
Earnings per Share£2.00
£2.50
Price per Share
£40
£25
Price-Earnings Ratio20
10
Number of Shares100,000200,000
Earnings
£200,000£500,000
Market Value
£4,000,000£5,000,000
Required:
a)How many shares in the combined firm have to be offered for each share in
Mintaka?

b)Derive the earnings per share, price per share, price-earnings ratio, earnings,
and market value associated with the combined firm.

c)What is the cost of the acquisition to Orion?

d)What is the change in the market value of Orion’s shares that were
outstanding before the acquisition?

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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