You are analyzing a potential acquisition of American Eagle Outfitters (AEO) by Gap: Assume AEO has 200
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Question:
You are analyzing a potential acquisition of American Eagle Outfitters (AEO) by Gap:
Assume AEO has 200 million diluted shares outstanding and are offered $15.00 per share, for a total offer value of $3.0b.
You (the analyst) makes the following assumptions:
- Offer value (equity purchase price):
- 60% in the form of GAP stock
- 40% in cash
- 80% of the cash consideration will be funded by new GAP debt - a 5 year note with an interest rate of 5%
- 20% of the cash consideration will be funded by acquirer B/S cash
- GAP will pay for transaction and financing fees using GAP's B/S cash
- Transaction fees will be 1.5% of the offer value
Financing fees will be 1% of the debt GAP issues to finance the deal
What is the Total Use of Funds (including debt, cash and equity) by GAP in this transaction?
Related Book For
Essentials of Corporate Finance
ISBN: 978-1260013955
10th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
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