march/june 2021 chakula co. Impact on Capital Structure Q

$4,253.7m is the total equity value of the combined company (which was calculated using the PE ratio as shown earlier in appendix 3). Under the cash offer, Chakula's shareholders receive $0.66 per share from the sale of Kawa, which is $1,320, in total. Therefore Lahla's shareholder value is the difference of 4,253.7 - 1,320 = $2,933.7m.

Thank you I understood. On the same question of Chakula Co, part (i) estimate the value of each Kawa Co share if it is a demerger. We use 75% to find the value attributable to equity. Where do we get that? I thought one could deduct the Mv of debt attributed to Kawa Co i.e. $400m to find the value attributable to Equity.

The question says that Kawa will maintain its capital structure after the unbundling. Currently the equity is 24.5% x 2,000 x $2.45 = $1,200. The loan notes B have a market value of $400. Therefore the equity is 1,200 / 1,600 = 75% of the total.