Harolds PLC has a market value of £400 million and 30 million shares outstanding. Selfishes Department Store has a market value of £160 million and 18 million shares outstanding. Harolds is contemplating acquiring Selfishes. Harolds’ CFO concludes that the combined firm with synergy will be worth £590 million, and Selfishes can be acquired at a premium of £15 million.
a. If Harolds offers 12 million shares of its stock in exchange for the 18 million shares of Selfridges, what will the stock price of Harolds be after the acquisition?
b. What exchange ratio between the two stocks would make the value of the stock offer equivalent to a cash offer of £175 million?

  • CreatedJune 17, 2015
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