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Hi,
I was stuck at figuring out what the deferred consideration was for this particular question.
Expander Plc wishes to acquire a 70% stake in Target plc by purchasing 280 million of Target’s 400
million £1 ordinary shares. Target currently has retained earnings of £1,360 million and is not
expecting to issue any shares or pay any dividends in the immediate future. The purchase of Target
will be paid for through a combination of immediate and deferred cash payments.
Expander will pay £5,000 million of cash at the date of acquisition, plus a further £2,000 million in
two years’ time.Would really appreciate it if you could help.
Thanks
The total consideration is $7,000m of which $5,000m is paid immediately and $2,000m is deferred and paid in 2 years time.
However I am puzzled where you found this question because depending on what is asked in the question, dealing with this completely is not in the syllabus for Paper FA.
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