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Hi, for Q3 (b), in the sample answer, for Kerrin Co new share issue, it is calculated as 750m / 2.1 = 357.14m.
I understand that the 750m is the no. of shares as calculated in pre-acquisition valuation, whilst the 2.1 is the relative valuation for the share-for-share offer. Please may I know why Kerrin new share issue is calculated as above?
Thank you.
My answer to the second question in the following post should explain it for you 🙂
Oh. Please let me explain my own interpretation after analyzing the discussion in the above link:
The division of 750m by 2.1 is due to the fact that it is a ratio calculation (which is used for comparison purpose). Therefore, it means that if 750m is worth the original Kerrin shareholders, 357.14m must be the value of the shares in Kerrin Co which is then given to the original shareholders of Danton Co, whilst Danton Co will also give 750m shares to Kerrin Co in exchange?
Please let me know if I’m wrong in any of this interpretation.
Thank you.
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