MFIN2235 Study Guide - Quiz Guide: Risk Arbitrage, Reverse Takeover, Shares Outstanding

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24 Nov 2017

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Consider a reverse merger, such that privco is merging into pubco. Assuming alpha acquires tango for 100% stock, what is the percentage premium that should be paid that leads to an equal split of the synergies: lion corp. and wildebeest inc. are going to merge, with lion buying wildebeest. Lion has a pe ratio of 20 and wildebeest has a pe ratio of 25. Lion has a market cap of million and wildebeest has a market cap of million. Neither company has debt, and both have shares outstanding of 1 million. Assume we need to keep credit statistics in line such that 2013 ebitda/interest expense is below 8. 0x (this might be a bank requirement) and we don"t want the deal to be dilutive. What is the percentage equity in each case: operating scenario 2 (upside) and synergies are , operating scenario 1 (normal) and synergies of .

Related Questions

Fantastic Three Ltd. has attracted a lot of attention in the market because of its high potential. The company has 20,000 shares outstanding that are currently trading at $20. Both OU Inc and Texas Inc have shown interest in the acquisition of Fantastic Three. OU has a market value of $1 million and 100,000 shares outstanding, while Texas has 500,000 shares trading at $15. In order to acquire Fantastic Three, OU has offered to pay to Fantastic's shareholders $600,000 cash, while Texas has offered to issue 40,000 new shares as a payment.
a) What is the minimum yearly amount of synergies created by the merger, respectively for OU and Texas that would justify such offers? Assume synergies are perpetual and the correct discount rate is 10% for both companies.

b) Assume yearly synergies from the merger with Fantastic Three would be $25,000 in perpetuity for both OU and Texas. What offer should Fantastic's shareholders accept?

Harrods PLC has a market value of Â£133 million and 5 million shares outstanding. Selfridge Department Store has a market value of Â£35 million and 2 million shares outstanding. Harrods is contemplating acquiring Selfridge. Harrodsâs CFO concludes that the combined firm with synergy will be worth Â£183 million, and Selfridge can be acquired at a premium of Â£10 million. a. If Harrods offers 1.2 million shares of its stock in exchange for the 2 million shares of Selfridge, what will the stock price of Harrods be after the acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) New stock price Â£ b. What exchange ratio between the two stocks would make the value of a stock offer equivalent to a cash offer of Â£45 million? (Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.) Exchange ratio to 1