Case synopsis: Company B has been planning from the past 6 months to merge with Company H. After few discussions, it has decided to make a cash offer of $250 million for Company H. Person B, the financial officer of Company B, has been involved in the negotiations of merger. He has prepared a pro forma financial statements for Company H assuming that the merger will take place. If Company B purchases Company H, then there will be an immediate payment of dividend. Person B has identified the interest rate of borrowing for both the companies. Characters in the case: Company B Company H Person B Adequate information: Both the companies that are planning to merge have niche markets in the industry of golf club. To calculate : The highest exchange ratio that Company B will be willing to pay for the merger.

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Chapter 26, Problem 4M

Summary Introduction

Case synopsis:

Company B has been planning from the past 6 months to merge with Company H. After few discussions, it has decided to make a cash offer of $250 million for Company H. Person B, the financial officer of Company B, has been involved in the negotiations of merger.

He has prepared a pro forma financial statements for Company H assuming that the merger will take place. If Company B purchases Company H, then there will be an immediate payment of dividend. Person B has identified the interest rate of borrowing for both the companies.

Characters in the case:

Company B

Company H

Person B

Adequate information:

Both the companies that are planning to merge have niche markets in the industry of golf club.

To calculate: The highest exchange ratio that Company B will be willing to pay for the merger.

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