LOUIEED CO (MAR / JUN 16)

1. for (b) in the initial offer ( five shares in Louieed Co for three shares in Tidded Co…..)

i really do not understand why we multiply this 5/3 to calculate Louieed Co’s share price.

Is it because Louieed Co acquires Tidded Co, Louieed Co will have higher number of outstanding shares from the acquisition while for Tidded Co will have Louieed Co’s share price x 5/3 ????

Does this mean ( for example) whenever company A acquires company B and when we calculate PE ratio of company B, we calculate the share price of company B based on the share price of A with the offer ???