Harrods PLC has a market value of 110 million and 5 million shares outstanding. Selfridge Department Store
Question:
Harrods PLC has a market value of £110 million and 5 million shares outstanding. Selfridge Department Store has a market value of £34 million and 2 million shares outstanding. Harrods is contemplating acquiring Selfridge. Harrods' CFO concludes that the combined firm with synergy will be worth £157 million, and Selfridge can be acquired at a premium of £4 million.
a. If Harrods offers 1.2 million shares of its stock in exchange for the 2 million shares of Selfridge, what will the stock price of Harrods be after the acquisition?
b. What exchange ratio between the two stocks would make the value of a stock offer equivalent to a cash offer of £38 million?
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...
Step by Step Answer:
Given data Harrods market value 110000000 Harrods shares outstanding 5000000 Self...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-0077861704
11th edition
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
