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Good day tutor,
This question (Louieed co from March/June 2016 paper) asks for the extra funds needed to finance the acquisition of Tidded co.
The answer seems to have missed the point that 2 of the original founders of Tidded will remain in Tidded post acquisition and that they will not take up any cash/share offer. These 2 founders hold 25% of the issued share capital, but yet the answer takes 100% of the share capital to calculate the funds needed for all of the options.
Would I be right if I had used 75% of the share capital to calculate the funds needed for option 3?
No.
Tidded will no longer exist as a separate company after the acquisition. The 25% of Tided’s shares currently help by the remaining 2 founders are part of the the 60% of Tidded’s shareholders who will take up the two-shares-for-one share offer under option (iii).
Right..that was silly of me to think that there would be both Tidded and Louieed shares after the acquisition. Thank you once again.
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