Thermo Fisher ("Fisher") is considering an acquisition of Life Technologies ("Life Tech"). Life Tech shares currently trade at $60.75 per share with 179.3 million shares outstanding. Fisher estimates that the standalone value of Life Tech is $12,727.90 and the expected value of synergy created from the acquisition is $3,159.30. Fisher offers $85.05 for each Life Tech share.
Thermo Fisher ("Fisher") is considering an acquisition of Life Technologies ("Life Tech"). Life Tech shares currently trade at $60.75 per share with 179.3 million shares outstanding. Fisher estimates that the standalone value of Life Tech is $12,727.90 and the expected value of synergy created from the acquisition is $3,159.30. Fisher offers $85.05 for each Life Tech 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
Related questions
Question
I don't understand C part. Please explain step by step
Transcribed Image Text:1. Thermo Fisher ("Fisher") is considering an acquisition of Life Technologies ("Life
Tech"). Life Tech shares currently trade at $60.75 per share with 179.3 million shares
outstanding. Fisher estimates that the standalone value of Life Tech is $12,727.90 and
the expected value of synergy created from the acquisition is $3,159.30. Fisher offers
$85.05 for each Life Tech share.
a. Does Fisher overpay for Life Tech?
Answer:
Target current market value = $10,892.48
Minimum price to offer = $12,727.90
Maximum price to offer = $15,887.20
Maximum price to offer per share = $88.61 > Offer price
Fisher does not overpay for Life Tech.
b. What is the premium implied by the offer price?
Answer:
Premium = 40%
c. How much of the net synergy (in percentage) does Fisher pay to Life Tech
shareholders?
Answer:
Fisher
pays 79.81% of net synergy to Life Tech shareholders.
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 3 steps with 5 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.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