Fantastic Three Ltd. has 20,000 shares outstanding that are currently trading at $20. Both Yamato Inc...

 

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Fantastic Three Ltd. has 20,000 shares outstanding that are currently trading at $20. Both Yamato Inc and Zoolander International have shown interest in the acquisition of Fantastic Three. Yamato has a market value of $1 million and 100,000 shares outstanding, while Zoolander has 500,000 shares trading at $15. In order to acquire Fantastic Three, Yamato has offered to pay to Fantastic's shareholders $600,000 cash, while Zoolander has offered to issue 40,000 new shares as a payment. a) What is the minimum dollar amount of annual, after-tax synergies created by the merger, for each Yamato and Zoolander, which would justify such offers? Assume synergies are perpetual and a discount rate is 10%. (8 marks) Fantastic Three Ltd. has 20,000 shares outstanding that are currently trading at $20. Both Yamato Inc and Zoolander International have shown interest in the acquisition of Fantastic Three. Yamato has a market value of $1 million and 100,000 shares outstanding, while Zoolander has 500,000 shares trading at $15. In order to acquire Fantastic Three, Yamato has offered to pay to Fantastic's shareholders $600,000 cash, while Zoolander has offered to issue 40,000 new shares as a payment. a) What is the minimum dollar amount of annual, after-tax synergies created by the merger, for each Yamato and Zoolander, which would justify such offers? Assume synergies are perpetual and a discount rate is 10%. (8 marks)

Answer rating: 100% (QA)

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