An acquirer has an issued capital of 300 million shares trading at $5.96. A target company...

An acquirer has an issued capital of 300 million shares trading at $5.96. 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 0.48 acquirer shares for each target company share. What is the likely post-announcement price of acquirer company stock (to two decimal places)?

Expert Solution

I. No. of Shares of Acquirer Company alloted to Acquirer Company = 500 Million Shares * 0.48/Share

No. of Shares of Acquirer Company alloted to Acquirer Company = 240 Million Shares

Total Number of Shares outstanding Post Acquisition = 300 Million + 240 Million = 540 Million

II.	Particulars	Shares Outstanding	Price/Share	Market Value
	A	B	C	*D = B C**
a	Acquirer Company	300 Million	$ 5.96	$1788 Million
b	Target Company	500 Million	$ 2.95	$1475 Million
c	Present Value of Synergy	.	.	$300 Million
d	Post-announcement Value of acquirer company	a+b+c	-	$3563 Million

III. Post Anouncement Price of Acquirer Price = Post-announcement Value of acquirer company / Shares outstanding Post Acquisition

Post Anouncement Price of Acquirer Price = $3563 Million / 540 Million

Post Anouncement Price of Acquirer Price = $6.60

jeff jeffy answered 2 years ago

An acquirer has an issued capital of 300 million shares trading at $6.04. A target company...

An acquirer has an issued capital of 300 million shares trading at $6.04. A target company has an issued capital of 500 million shares trading at $3.03. 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 acquirer company stock (to two decimal places)?

An acquirer has an issued capital of 300 million shares trading at $6.06. A target company...

An acquirer has an issued capital of 300 million shares trading at $6.06. A target company has an issued capital of 500 million shares trading at $2.99. 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?

An acquirer has an issued capital of 300 million shares trading at $5.95. A target company...

An acquirer has an issued capital of 300 million shares trading at $5.95. A target company has an issued capital of 500 million shares trading at $2.78. 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 Alpha Trading Ltd. has a share capital of 2,000 shares, issued at the par value...

Company Alpha Trading Ltd. has a share capital of 2,000 shares, issued at the par value of 100 RON/share. In September N the company issues another 1,000 shares at 150 RON/share. On 30th September N all the shares were subscribed but contribution has not yet been paid. On 31st of October N, the shareholder paid the contribution. Which of the following is correct? Choose one On 31.10.N cash decreases with 100,000 RON On 31.10.N the shareholders’ receivable increases with 150,000...

(A) A company has a capital structure comprising 5 million issued shares with a current market...

(A) A company has a capital structure comprising 5 million issued shares with a current market price of $10 per share. Expected profit is $6 million, all of which will be paid out as dividends. The company has no debt and pays no tax on its profits. (i) Under the present capital structure, what is the market value of the firm? (1 mark) (ii) What is the rate of return (% pa) on the company’s equity capital?...

Suppose company ZZ has issued 10 million shares which are trading at GHS 5 each; 4...

Suppose company ZZ has issued 10 million shares which are trading at GHS 5 each; 4 million preference shares at GHS 4 and 1,500 bonds at GHS 10,000 each. What is this company’s capital structure? What is the minimum amount that ZZ must generate annually to satisfy its 3 classes of investors, if the coupon rate on the bonds is 20%, the dividend rate on the preference shares is 24% and equity holders require 30% on their investment? The company’s...

Weighted Average Cost of Capital. a) Suppose company AA has issued 10 million shares which are...

Weighted Average Cost of Capital. a) Suppose company AA has issued 10 million shares which are trading at GH¢10 each. It has also issued 2 million preference shares trading at GH¢8, and its 1,000 bonds are trading at GHS10,000 each. Describe the firm’s capital structure in percentages. [4 marks] b) Suppose investors require the following rates of return if they are to buy the securities of A: Common shares: 36% Preferred shares: 28% Long-term debt: 24% i) To meet these...

Acquirer pays 1,000 for all the shares of Target Corp on Jan 2 of the current...

Acquirer pays 1,000 for all the shares of Target Corp on Jan 2 of the current year. Targets assets have a basis of 200. a) Under what cases would acquirer want to make an election under Section 338? b) When is the due date of the election?

A company has $119 million in outstanding bonds, and 10 million shares of stock currently trading...

A company has $119 million in outstanding bonds, and 10 million shares of stock currently trading at $39 per share.The bonds pay an annual coupon rate of 6% and is trading at par. The company's beta is 0.9, its tax rate is 40%, the risk-free rate is 4%, and the market risk premium is 5%. What is this firm's WACC?

A company has $105 million in outstanding bonds, and 10 million shares of stock currently trading...

A company has $105 million in outstanding bonds, and 10 million shares of stock currently trading at $36 per share.The bonds pay an annual coupon rate of 9% and is trading at par. The company's beta is 0.8, its tax rate is 40%, the risk-free rate is 2%, and the market risk premium is 6%. What is this firm's WACC?

Question