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Sir can you explain the share for share exchange calculation in a simpler way? The mark scheme one seemed extremely complicated.
Also, since the premium is paid from the view of dentro (the target company) why did we Include the synergies then ? I thought that synergies are included depending on whose view we are doing the calculations on. If it’s the target company then synergy is not included. But here it was included. Why so ?
They current number of shares in Dentro is 500/0.40 = 1,250.
Sigra is offering 3 shares for every 2 Dentro shares.
So in total they will issue 3 x 1,250/2 = 1,875 shares. So Sigra will end up with 12,875 shares.
The new market value of these shares is $3.644 per share.
Therefore someone in Dentro currently owning 2 shares currently worth 2 x $4.50 = $9.00 will end up owing 3 shares in Sigra worth 3 x $3.644 = $10.932.
So for every 2 shares they currently own, they will gain 10.932 – 9.00 = 1.932
So the gain per current share is 1.932/2 = $0.966.The current value per share is 4.50, so the % gain = 0.966/4.50 = 21.5%
The synergy has to be included because this affects the value of the Sigra shares after all this has happened!
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