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I was thinking about doing this but it was too late for me by the time I thought of it. I don’t remember if it said anything in exhibit 1 about the sale of that division being something they were going to do related to the acquisition or if it was a totally standalone decision. If it had anything to do with the acquisition I think adding it on was the right thing to do. It’d make sense if that’s the case because otherwise the 2 mark part was a really weird inclusion in the question. If it was happening immediately you wouldn’t need to discount it either.
From what I can remember, the 19 mark calculation part of the question just asked about the gain to Frodir Co shareholders so you’re right about that. I think it only took a few seconds to calculate the gain to the predator company after that so I did that to include it in the discussion later on in the part where it asked you to talk about the effects of the cash and share for share offer on the predator company which was worth 7 marks or something like that.
I did the same method but ended up with a 2000m ish loss. Maybe I subtracted all of the liabilities instead of just 25% while I was rushing but what you did sounds right.
Yeah I want to say cash gain was around 1200m and share for share was around 1500m, that’s for the target company shareholders, divided by the number of shares the target company had pre-acquisition (1200?). I got the total gain on acquistion to be about 5200m so I figured the gain to the parent company was the total gain less the 1200m or the 1500m.
I agree with this, share for share was better for the target company so I thought it would be the one they accepted. I spoke about it being better that way for the shareholders of the predator company as well because the cash consideration they were offering was a huge amount of the current assets they had.
That 2 mark bit at the start of the report was a bit strange. Was it as easy as it looked? I just took 25% of the current assets and liabilities and took that off the price and got a loss?
Yeah both should be acceptable I wish I’d stated that on my paper haha. And I remember on the APV question that the cash flows were already poat tax but who knows anymore
I also discounted the cash flows at 12% but discounted the APV stuff at 3.2%,did you tax your cash flows?
Nevermind I think I’ve got it – for some reason I was thinking about buying futures on the transaction date for the futures price (96.45) and selling them for the “what if LIBOR increased” spot rate on that date (96.50) which obviously you can’t do. You would be buying and selling futures for 96.45 therefore making no gain and therefore there’s no point.
Thanks again for your lectures and all the support you give us students.
