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Good day tutor,
I understand all the workings to the question “estimate the value attributable to Cigno shareholders from the acquisition of Anatra co” and how the examiner got $128m as the answer. My question is, would it be wrong to have the $128m apportioned according to the equity values of each company?
For instance, the Cigno shareholders would get ($36,000m/$57,000m x 128m = 80.8m) in value post acquisition, while the remaining would go to Anatra Co.
Yes, it would be wrong.
The question says they will have to pay a premium of 35% to Anatra’s shareholders, so on the current market value of 21,000 they will have to pay 7,350. So the total cost, including the debt of 9,000, is 37,350.
The new total value of the company is 37,478 (the workings are in the appendix), so if 37,350 goes to Anatra it leave the difference of 128 to Cigno.
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