nas share a market value RISıno £30 per share. Macro is expected to pay a dividend of £3 per share next year and the dividends are expected to grow constantly at 5% a year. Macro PLC is approaching Micro PLC for a potential acquisition. Macro is making an offer to acquire the whole of Micro's 500 thousand shares, which are currently valued at £4 on the market Micro PLC is expected to pay a dividend of £1 per share in a year's time and the dividends are expected to grow at 4% for a foreseeable future. The expectation is that if the acquisition is successful, the merged company
nas share a market value RISıno £30 per share. Macro is expected to pay a dividend of £3 per share next year and the dividends are expected to grow constantly at 5% a year. Macro PLC is approaching Micro PLC for a potential acquisition. Macro is making an offer to acquire the whole of Micro's 500 thousand shares, which are currently valued at £4 on the market Micro PLC is expected to pay a dividend of £1 per share in a year's time and the dividends are expected to grow at 4% for a foreseeable future. The expectation is that if the acquisition is successful, the merged company
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:QUESTION C2
Macro PLC current has 1 million shares outstanding, with a market value of
£30 per share. Macro is expected to pay a dividend of £3 per share next year
and the dividends are expected to grow constantly at 5% a year.
Macro PLC is approaching Micro PLC for a potential acquisition. Macro is
making an offer to acquire the whole of Micro's 500 thousand shares, which
are currently valued at £4 on the market.
Micro PLC is expected to pay a dividend of £1 per share in a year's time and
the dividends are expected to grow at 4% for a foreseeable future.
The expectation is that if the acquisition is successful, the merged company
will be able to deliver a better dividend growth rate of 8%.
Required:
a. Estimate the gain of the acquisition if it goes ahead.
b. How much is the cost of the acquisition under the current £6 cash
payment offer?
c. Critically discuss at least three sensible motives for mergers and
acquisitions.
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