Suppose that Flight Centre has made an offer for Webjet that consists of the cash purchase of 1.4 million shares at $13 per share. The value of Webjet’s stock before the bid was made public was $11 per share. Flight Centre’s stock is trading at $20 per share, and there are 20 million shares outstanding. Flight Centre estimates that the merger synergy will be $3.5 million per year, forever. The appropriate discount rate for these gains is 12%. What is the estimated value of the Flight Centre post-merger?
Suppose that Flight Centre has made an offer for Webjet that consists of the cash purchase of 1.4 million shares at $13 per share. The value of Webjet’s stock before the bid was made public was $11 per share. Flight Centre’s stock is trading at $20 per share, and there are 20 million shares outstanding. Flight Centre estimates that the merger synergy will be $3.5 million per year, forever. The appropriate discount rate for these gains is 12%. What is the estimated value of the Flight Centre post-merger?
Chapter23: Corporate Restructuring
Section: Chapter Questions
Problem 10P
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Suppose that Flight Centre has made an offer for Webjet that consists of the cash purchase of 1.4 million shares at $13 per share. The value of Webjet’s stock before the bid was made public was $11 per share. Flight Centre’s stock is trading at $20 per share, and there are 20 million shares outstanding. Flight Centre estimates that the merger synergy will be $3.5 million per year, forever. The appropriate discount rate for these gains is 12%. What is the estimated value of the Flight Centre post-merger?
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