The table below contains information regarding Steinhoffest Ltd(the aquirer) and Furniture Seller Ltd (its target)...

The table below contains information regarding Steinhoffest Ltd (the aquirer) and Furniture Seller Ltd (its target) and the proposed takeover deal. Other information provided is: the negotiated price/share is R30; the expected value of the merger is R20m and Steinhoffest Ltd is paying for the purchase by issuing its own shares. Use this information to answer the following questions: 1) What is the total value of Furniture Seller Ltd to Steinhoffest Ltd? (1 mark) 2) How many shares of Steinhoffer Ltd will need to be issued to purchase Furniture Seller Ltd? (2 mark) 3) What is the expected NPV to Steinhoffer Ltd of the takeover deal Furniture Seller Ltd?

	Steinhoffest Ltd	Furniture Seller Ltd
Current Share Price	R100	R25
No. of shares in issue	10 000 000	2 000 000
Current Market Value(R)	R1 000 000 000	R50 000 000

Solutions

Expert Solution

1) What is the total value of Furniture Seller Ltd to Steinhoffest Ltd? (1 mark)

Total value = Shares O/s of Furniture Limited * Offer Price

Total value = 2000000 * 30

Total value = R60000000

2) How many shares of Steinhoffer Ltd will need to be issued to purchase Furniture Seller Ltd?

Shares to be Issued = Total Value / Share price of Steinhoffer

Shares to be Issued = 60000000 / 100

Shares to be Issued = 600000 Shares

3) What is the expected NPV to Steinhoffer Ltd of the takeover deal Furniture Seller Ltd?

Expected NPV = Current Market Value of Furniture + Expected Value of merger - Value Paid

Expected NPV = 20 M + 50 M - 60 M

Expected NPV = R10000000

jeff jeffy answered 1 year ago

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