Nente Co June 2012( Mergers and acquisition)

Hi John 🙂

Question 1(ii)-Percentage gain in value to Mije Co(cash offer)

In the answer scheme, they use additional value created(Nente Co+synergy) to calculate the percentage gain. Can I use the combined value after acquisition instead? I still got the same answer.

Calculation:

Combined company earnings= $3200000+$150000+$620000 = $3970000
Combined company no. of share = 10 million shares since no share exchange
Combined company EPS = $3970000/10 million = $0.397
Share price = PE x EPS = 15 x 0.397 = $5.96

Total value of share = $5.96 x 10 million= $59600000
After deduct with cash offer = $59600000- $7080000 =$ 52520000

Percentage gain = (52520000/($4.8 x 10 million))-1 =9.4%