ABC has 1.00 million shares outstanding, each of which has a price of $17. It has made a takeover offer ofXYZ Corporation, which has 1.00 million shares outstanding, and a price per share of $2.52. Assume that the takeoverwill occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the twofirms.a. Assume ABC made a cash offer to purchase XYZ for $3.41 million. What happens to the price of ABC and XYZ onthe announcement? What premium over the current market price does this offer represent?b. Assume ABC makes a stock offer with an exchange ratio of 0.14. What happens to the price of ABC and XYZthis time? What premium over the current market price does this offer represent?c. At current market prices, both offers are offers to purchase XYZ for $3.41 million. Does that mean that your answersto parts (a) and (b) must be identical? Explain.

ABC has 1.00 million shares outstanding, each of which has a price of $17. It has made a takeover offer of XYZ Corporation, which has 1.00 million shares outstanding, and a price per share of $2.52. Assume that the takeover vill occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two rms. 1. Assume ABC made a cash offer to purchase XYZ for $3.41 million. What happens to the price of ABC and XYZ on he announcement? What premium over the current market price does this offer represent? . Assume ABC makes a stock offer with an exchange ratio of 0.14. What happens to the price of ABC and XYZ his time? What premium over the current market price does this offer represent? . At current market prices, both offers are offers to purchase XYZ for $3.41 million. Does that mean that your answers o parts (a) and (b) must be identical? Explain.

ABC has 1.00 million shares outstanding, each of which has a price of $17. It has made a takeover offer of XYZ Corporation, which has 1.00 million shares outstanding, and a price per share of $2.52. Assume that the takeover vill occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two rms. 1. Assume ABC made a cash offer to purchase XYZ for $3.41 million. What happens to the price of ABC and XYZ on he announcement? What premium over the current market price does this offer represent? . Assume ABC makes a stock offer with an exchange ratio of 0.14. What happens to the price of ABC and XYZ his time? What premium over the current market price does this offer represent? . At current market prices, both offers are offers to purchase XYZ for $3.41 million. Does that mean that your answers o parts (a) and (b) must be identical? Explain.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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4. The following table shows pre-merger data for ABC Company and XYZ, Inc. ABC XYZ No of share outstanding 2,000,000 5,000,000 EPS $2.50 $4.00 Price per share $15.00 $60 a) Assume XYZ is taking over ABC by issuing one of its shares for four shares of ABC. If there is no synergy, what would be the post-merger share price of XYZ? What would be the NPV of the merger? b) Assume there is synergy value of $4,200,000 created from the merger. What would be the post-merger price per share of XYZ? What would be the NPV of the merger? 5. Lazos Company is in distress mainly due to its failure to adopt the current technology. Creditors took Lazos to bankruptcy court and Lazos is fighting for a reorganization. The following is its condensed balance sheet. Book Value Market Value Current assets $ 120,000.00 $ 100,000.00 Machinery 200,000.00 150,000.00 Other fixed…
Which of the following statements regarding merger deals is (are) correct? Choose all correct answer(s) On average, the price of the target increases substantially, while the price of the bidder does not increase by much. If the premium paid by the bidder exceeds the expected additional value to be created through the merger, the bidder's share price is likely to drop on the announcement of the bid. A bidder can often acquire a public-listed company for less than its current market value. Synergies are by far the most common justification that bidders give for the premium they pay for a target.
ABC Corporation operates hotels and restaurants in the central business district of Makati City. It is aiming to acquire XYZ Inc. another corporation in Pampanga. This corporation runs small hostels. ABC offers to acquire XYZ by offering 100,000 ABC ordinary shares valued at P12,000,000. 1. Kind according to purpose (Choose 1) a. Horizontalb. Verticalc. Product Extentiond. Market Extensione. Congenericf. Conglomerate 2. Kind according to approach to the target firm (Choose 1)a. Friendlyb. Hostile 3. Kind according to acquisition mode (Choose 1) a. Cashb. Equity swapc. Mix of cash and equity swap
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Apex Corporation is considering the purchase of Pinnacle Company in a stock-for-stock exchange. Selected data on the two companies are shown in the following table: Apex Pinnacle $845 $120 40 36 Sales (millions) Earnings after taxes (millions) Common shares outstanding (millions) Share price Earnings per share Dividends per share. P/E ratio Dividend payout ratio Assume that there are no synergistic benefits as the result of the merger. Determine EPS for the combined company if Apex offers a (Round your answers to three decimal places): a. 10 percent premium for Pinnacle $ b. 20 percent premium for Pinnacle $ c. 30 percent premium for Pinnacle $2,190 $ 280 70 72 $ $ $ 4.00 2.00 18 50% $ $ 3.00 1.20 12 40%
Acquiring Corporation is considering a takeover of Takeover Target Incorporated. Acquiring has 16 million shares outstanding, which sell for $30 each. Takeover Target has 8 million shares outstanding, which sell for $23 each. If the merger gains are estimated at $40 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders? Highest price per share
Xterm R US has offered $178,500 cash for all of the common stock of Outdoor Co. Based on recent market information Outdoor Co is worth $174,200 as an independent operation. If the merger makes economic sense for Xterm R US, what is the minimum estimated value of the synergistic benefits from the merger? A)4300 B) 4730 C) 5160 D) 4000 E) 4945
In a split - off transaction, if the subsidiary's book value is $150 million, and the parent company decides to distribute 80% of the subsidiary's book value to the shareholders of the new entity, how much will a shareholder holding 100 shares in the new entity receive in cash? Assume that the company has 1.25 million shares outstanding.
The Justice Department has been asked to review a merger request for a market with the following four firms. Firm Assets A $10 Million B 20 Million C 100 Million D 30 Million If Firm A acquires Firm D, what is the HHI for the new market? 4,687.50 3,906.25 625 100

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