The shareholders of Flannery SA have voted in favour of a buyout offer from Stultz Corporation. Information
Question:
The shareholders of Flannery SA have voted in favour of a buyout offer from Stultz Corporation. Information about each firm is given here:
Flannery’s shareholders will receive one share of Stultz equity for every three shares they hold in Flannery.
(a) What will the EPS of Stultz be after the merger? What will the PE ratio be if the NPV of the acquisition is zero?
(b) What must Stultz feel is the value of the synergy between these two firms? Explain how your answer can be reconciled with the decision to go ahead with the takeover.
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ANSWER To determine the impact of the merger on Stultz Corporations earnings per share EPS and priceearnings PE ratio we need to calculate the combine...View the full answer
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Related Book For 
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe
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