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sir in this question, i have a doubt related to the Mixed offer.
As per this offer, if we give $2.09 as cash and $2.6 worth share, MV to equity attributable to Tai co’s shareholders equal(2.09+2.6)*263=$1233.47. this means out of the total combined MV of equity of $6719, we are left with only $5486. And this MV of equity attributable to pre-existing Opao shareholders, will equate to 5486/2000=$2.74 per share. Which clearly contradicts the claim of the examiner that MV per share of Opao becomes $2.6.
Simply put, how can the same co.,Opao, trade at 2 different values of $2.6 Vs. $2.74?
No doubt I am missing something, but please tell me where in the answer it is that the examiner claims that the MV per share of Opao become $2.60.
here is the exact line from question paper,
“(iii) Through a mixed offer of a cash payment of $2.09 per share and one Opao Co share for each Tai Co share. It is estimated that Opao Co’s share price will become $2.60 per share when such a mixed offer is made.”
Sorry, I thought you were referring to something in the answer!
I don’t know how the examiner arrived at $2.60 per share, but the question does not expect you to check the calculation. If the question says that it is $2.60 then for that part of the question you take $2.60 and don’t worry about where the figure comes from!
sir i wouldn’t have worried if i was getting the right answer taking post-acquisition share price as $2.6, for both Tai and opao. For tai if we take (($2.60 + $2.09) – $3.80)/$3.80 = 23.4% am getting the right answer. but if i take (2.6-2.5)/2.5=4% gain for Opao shareholders, which is apparently not the right answer. The right answer uses ($2.74-$2.5)/2.5=9.6%.
given that the examiner states that post-acquistion share price becomes $2.6, i think in exam scenario i wouldn’t have known if $2.6 is just attributable to target and a DIFFERENT SHARE PRICE is to be used for calculating the gain in share price for acquirer’s shareholders or vice-versa.
Hence this sum is totally freaking me out!
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