Hasdwa Ltd is considering the acquisition of Patwa Ltd, currently Hasdwa has an annual earnings of Kshs 51 Million, 20 million ordinary shares outstanding and each share sells for Ksh130. Likewise the annual earnings for Patwa are Kshs9 million, 6 million ordinary shares outstanding and a market price per share of Kshs 160. Whereas the earnings of Hasdwa are expected to grow at the rate of 5% p.a those of Patwa Lts. Would grow at the annual rate of 12% p.a in the absence of any mergers. Hasdwa offers 1.5 shares for each share of Patwa. Assume that there are 110 synergistic effects likely from the merger. Required: Determine the effect of the acquisition on each company’s earnings per share
Hasdwa Ltd is considering the acquisition of Patwa Ltd, currently Hasdwa has an annual earnings of Kshs 51 Million, 20 million ordinary shares outstanding and each share sells for Ksh130. Likewise the annual earnings for Patwa are Kshs9 million, 6 million ordinary shares outstanding and a market price per share of Kshs 160. Whereas the earnings of Hasdwa are expected to grow at the rate of 5% p.a those of Patwa Lts. Would grow at the annual rate of 12% p.a in the absence of any mergers. Hasdwa offers 1.5 shares for each share of Patwa. Assume that there are 110 synergistic effects likely from the merger. Required: Determine the effect of the acquisition on each company’s earnings per share
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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Hasdwa Ltd is considering the acquisition of Patwa Ltd, currently Hasdwa has an annual earnings of Kshs 51 Million, 20 million ordinary shares outstanding and each share sells for Ksh130. Likewise the annual earnings for Patwa are Kshs9 million, 6 million ordinary shares outstanding and a market price per share of Kshs 160. Whereas the earnings of Hasdwa are expected to grow at the rate of 5% p.a those of Patwa Lts. Would grow at the annual rate of 12% p.a in the absence of any mergers. Hasdwa offers 1.5 shares for each share of Patwa. Assume that there are 110 synergistic effects likely from the merger.
Required:
Determine the effect of the acquisition on each company’s earnings per share
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