Acquiring Corp. is considering a takeover of Takeover Target Inc. Acquiring has 12 million shares outstanding, which sell for $20 each. Takeover Target has 6 million shares outstanding, which sell for $10 each. If the merger gains are estimated at $24 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders?
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Acquiring Corp. is considering a takeover of Takeover Target Inc. Acquiring has 12 million shares outstanding, which sell for $20 each. Takeover Target has 6 million shares outstanding, which sell for $10 each. If the merger gains are estimated at $24 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders?
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- Acquiring Corporation is considering a takeover of Takeover Target Incorporated. Acquiring has 16 million shares outstanding, which sell for $30 each. Takeover Target has 8 million shares outstanding, which sell for $23 each. If the merger gains are estimated at $40 million, what is the highest price per share that Acquiring should be willing to pay to Takeover Target shareholders? Highest price per shareWinterbourne is considering a takeover of Monkton Incorporated. Winterbourne has 29 million shares outstanding, which sell for $78 each. Monkton has 24 million shares outstanding, which sell for $96 each. If the merger gains are estimated at $120 million, what is the highest price per share that Winterbourne should be willing to pay to Monkton shareholders? Highest price per shareGobi Desserts is bidding to take over Universal Puddings. Gobi has 3,500 shares outstanding, selling at $55 per share. Universal has 2,500 shares outstanding, selling at $22.50 a share. Gobi estimates the economic gain from the merger to be $22,500. Required: If Universal can be acquired for $25 a share, what is the NPV of the merger to Gobi? What will Gobi sell for when the market learns that it plans to acquire Universal for $25 a share? (Round your answer to 2 decimal places.) What will Universal sell for? Assume that the market expects the merger to go through without any further bidding. What are the percentage gains to the shareholders of each firm? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Now suppose that the merger takes place through an exchange of stock. On the basis of the premerger prices of the firms, Gobi sells for $55, so instead of paying $25 cash, Gobi issues 0.45 of its shares for every Universal share acquired. What will be…
- ABC has 1.00 million shares outstanding, each of which has a price of $17. It has made a takeover offer of XYZ Corporation, which has 1.00 million shares outstanding, and a price per share of $2.52. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms. a. Assume ABC made a cash offer to purchase XYZ for $3.41 million. What happens to the price of ABC and XYZ on the announcement? What premium over the current market price does this offer represent? b. Assume ABC makes a stock offer with an exchange ratio of 0.14. What happens to the price of ABC and XYZ this time? What premium over the current market price does this offer represent? c. At current market prices, both offers are offers to purchase XYZ for $3.41 million. Does that mean that your answers to parts (a) and (b) must be identical? Explain.Corporation A is deciding on an acquisition. Corporation A would buy all shares of corporation B, for a total of 500,000 shares of B. Currently, corporation B is expected to pay a constant dividend forever of $12 per share. The market price of B shares reflects these expectations, and the required rate of return is 4%. A can buy B shares at their current market price, and management expects to be able to exploit synergies between the two corporations and increase revenues. Thus, according to A’s management, if the acquisition takes place the dividend per share for next year is expected to be $12, but dividends are then expected to grow forever at a rate of 3% per year. The required rate of return on stock B would stay unchanged at 4%. What is the NPV of the acquisition? .NewCo is trying to fully acquire OldCo in an all cash offer. NewCo will assume all the debt of OldCo as part of the acquisition. The expected synergies from the acquisition are $700 million. Before the transaction OldCo has 25 million shares outstanding, a share price of $65, and outstanding debt of $500 million (no excess cash). Is the following statement true or false? If NewCo offers $65 per share of OldCo and the acquisition is successful, the shareholders of NewCo will have captured the full value of the synergies of this transaction. Pick One: True False
- Firm X is going to acquire Firm Y. The acquisition will be done via a share exchange, whereby Firm X will exchange two of its shares for every one of Firm Y’s shares. Synergy is $1,500,000 in total. Firm X (Bidder) Firm Y (Target) Shares Outstanding 1,500,000 150,000 Price per Share $50 $80 Earnings 2,400,000 1,950,000 43. What is the takeover premium in dollars? (Tip: round the share price of the combined firm to two decimal places in calculating your answer.) A) $5,700,000 B) $1,500,000 C) $2,751,000 D) $2,500,000 E) $3,000,000e. Rearden Metal is thinking of buying Associated Steel, which has earnings per share of $1.25, 4 million shares outstanding, and a price per share of $15. Rearden Metal will pay for Associated Steel by issuing new shares. There are no expected synergies from the transaction. If Rearden pays no premium to buy Associated Steel, then Rearden's price-earnings ratio after the merger will be closest to: 10.0. 10.42. 12.0. 7.8.Nataro, Inc is planning on merging with Celestia Corp. Nataro, Inc with will pay shareholders the current value of their stock using shares of Nataro as the form of payment. Nataro has 5600 shares outstanding at a market price of $27.25 per share. Celestia Corp has 8,000 shares outstanding at a market price of $5.75 per share. The expected synergy created by the merger is $4200. What is the value of the merged firm (excludes cost of acquisition)? A. 205600 B. 201400 C. 159600 D. 54400 E. 68750
- Denali Inc. is acquiring Whitney Corp. at an exchange ratio of 2:1. After the deal is announced, Denali’s stock price is $25 and Whitney’s stock price is $47. Create a trade that would take advantage of the merger arbitrage opportunity, starting with 100 shares of Whitney’s stock. Show in detail the profit from your portfolio if between today and the deal being completed, Denali’s stock price falls to $20.George's Equipment is planning on merging with Nelson Machinery. George's will pay Nelson's shareholders the current value of their stock in shares of George's Equipment. George's currently has 4,600 shares of stock outstanding at a market price of $31 a share. Nelson's has 1,600 shares outstanding at a price of $38 a share. What is the value per share of the merged firm?Both of Firm A and Firm B are 100 equity firms. You estimate that the incremental value of the acquisition is $100,000. Firm B has indicated that it will agree to a sale if the price is $150,000, payable in cash or stock. Firm B is worth $100 as a stand-alone, so this is the minimum value that we could assign to Firm B. Calculate the value of firm A after merger. Firm A Firm B Price per share $2 $1 Number of shares 50,000 100,0000