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Hi John,
Could u please explain the below mentioned proposed payment method for acquistion in Hav co ques..
3rd payment method
A CASH offered of 1.25$ share plus one 100$ 3% convertible bonds for every $5 nominal value of strand co shares.In 6 years the bond can be converted into 12 hav co shares or redeemed at par..
(The nominal value of stand co share in ques is 25c….total shares are 1200million)
In ques..we have to calculate the % premium per share the strand co. sh.holders will receive..I am unable to understand the convertible bonds part…please could u explain that..
Thank you
Hi John,
Sorry for bothering you again. Can i have the ans for the above mentioned doubt?
Thank you
I am sorry – I thought I had answered this, but obviously not 🙁
I assume you are happy with the first bit of the answer – that for each share currently held they will receive bonds with a nominal value of $100, together with the cash payment. And it is on these figures that he has calculated the premium.
What he has written about afterwards is explaining that because the bonds can be converted later into shares, it would effectively be like getting shares at $8.33 each. Since the shares are currently $9.24 each, and will likely be higher still by the time they convert, then the benefit would end up being even greater.
Hope that makes sense 🙂
Sorry john…
Can you explain the first bit of the question?
A CASH offered of 1.25$ share plus one 100$ 3% convertible bonds for every $5 nominal value of strand co shares.
I couldn’t get this one…the calculation basically
The shares have a nominal value of $0.25 per share. So $5 nominal value means $5/$0.25 = 20 shares.
So it is saying that for every 20 shares they currently hold, they will receive one $100 bond, which is effectively $100/20 or $5 per current share. In addition they will get $1.25 per share, so a total of 5 + 1.25 = $6.25 value for every one share.
Dear John,
With the secound part of the option iii) i.e. In six years , the bond can be converted into 12 Hav Co shares or redeemed at par.
What is the relevance of this part in whole option iii ?
if we have find out already that for every 20 shares they recieve one $100 bond which is $5 per current share.
let say if we find the share price by conversion into 12 Hav co shares. Does it go wrong….?
Please explain the secound part of option iii and nominal value of shares and why these nominal value is used to determine number of shares , since we already provided number of shares i.e 12 in question ?
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