Problem 31-13 Merger gains and costs Winterbourne is considering a takeover of Monkton Inc. Winterbourne has 25 million shares outstanding, which sell for $70 each. Monkton has 20 million shares outstanding, which sell for $35 each. Merger gains are estimated at $100 million. If Winterbourne has a price-earnings ratio of 12 and Monkton has a P/E ratio of 8, what should be the P/E ratio of the merged firm? Assume in this case that the merger is financed by an issue of new Winterbourne shares. Monkton will get one Winterbourne share for every two Monkton shares held. Assume that merged firm will have net earnings equivalent to the sum of each individual firm. (Do not round intermediate calculations. Round your answer to 2 decimal places.) P/E ratio of the merged firm Problem 31-20 Merger Tactics Valeant and its ally, Pershing Square, lost the battle to acquire Allergan. Sometimes, the losers in a takeover battle can also win if they own a toehold stake in the target's stock. Between April and June 2014, Pershing acquired a 11.30% stake in Allergan at an estimated average price of $160 a share. In November, Actavis offered $235 per share for each of Allergan's 459 million shares. What was Pershing's profit on its holding? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.) Pershing's profit 2$ 3,890.0 million
Problem 31-13 Merger gains and costs Winterbourne is considering a takeover of Monkton Inc. Winterbourne has 25 million shares outstanding, which sell for $70 each. Monkton has 20 million shares outstanding, which sell for $35 each. Merger gains are estimated at $100 million. If Winterbourne has a price-earnings ratio of 12 and Monkton has a P/E ratio of 8, what should be the P/E ratio of the merged firm? Assume in this case that the merger is financed by an issue of new Winterbourne shares. Monkton will get one Winterbourne share for every two Monkton shares held. Assume that merged firm will have net earnings equivalent to the sum of each individual firm. (Do not round intermediate calculations. Round your answer to 2 decimal places.) P/E ratio of the merged firm Problem 31-20 Merger Tactics Valeant and its ally, Pershing Square, lost the battle to acquire Allergan. Sometimes, the losers in a takeover battle can also win if they own a toehold stake in the target's stock. Between April and June 2014, Pershing acquired a 11.30% stake in Allergan at an estimated average price of $160 a share. In November, Actavis offered $235 per share for each of Allergan's 459 million shares. What was Pershing's profit on its holding? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.) Pershing's profit 2$ 3,890.0 million
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
Related questions
Question
Transcribed Image Text:Problem 31-13 Merger gains and costs
Winterbourne is considering a takeover of Monkton Inc. Winterbourne has 25 million shares outstanding, which sell for $70 each.
Monkton has 20 million shares outstanding, which sell for $35 each. Merger gains are estimated at $100 million.
If Winterbourne has a price-earnings ratio of 12 and Monkton has a P/E ratio of 8, what should be the P/E ratio of the merged
firm? Assume in this case that the merger is financed by an issue of new Winterbourne shares. Monkton will get one
Winterbourne share for every two Monkton shares held. Assume that merged firm will have net earnings equivalent to the sum of
each individual firm. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
P/E ratio of the merged firm
Transcribed Image Text:Problem 31-20 Merger Tactics
Valeant and its ally, Pershing Square, lost the battle to acquire Allergan. Sometimes, the losers in a takeover battle can also win if
they own a toehold stake in the target's stock. Between April and June 2014, Pershing acquired a 11.30% stake in Allergan at an
estimated average price of $160 a share. In November, Actavis offered $235 per share for each of Allergan's 459 million shares.
What was Pershing's profit on its holding? (Do not round intermediate calculations. Enter your answer in millions rounded to 1
decimal place.)
Pershing's profit
2$
3,890.0 million
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 3 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education