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 $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?
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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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?
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