Question: Mistral Software is considering a merger with Amsted Technologies. Mistral has 1.2 million shares outstanding with a value of $22, while Amsted has 800,000 shares

Mistral Software is considering a merger with Amsted Technologies. Mistral has 1.2 million shares outstanding with a value of $22, while Amsted has 800,000 shares outstanding with a $23 value. The merged company's WACC will be 10%.
a. If Mistral believes the combined firm will have a market value of $50 million, what value of synergy is anticipated?
b. Assuming that synergy is estimated at $5.2 million and that $2 million of it is from cost savings expected in Year 1 due to the elimination of duplicate services, what must the remaining annual synergies be for the next 9 years to achieve the total expected synergies?
c. Based on the $50 million merged firm value, what is the maximum Mistral could pay for Amsted's shares in cash?
d. How much synergy will shareholders of Mistral and Amsted receive if a cash offering is made by Mistral to Amsted for (i) $23, (ii) $25, and (iii) $30 per share?

Step by Step Solution

★★★★★

3.31 Rating (163 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a 50000000 1200000 x 22 800000 x 23 5200000 b 52 x 11 572 total value of syner... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

895-B-F-F-M (7930).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

Marston Marble Corporation is considering a merger with the Conroy Concrete Company. Conroy is a publicly traded company, and its current beta is 1.30. Conroy has been barely profitable, so it has...

Marston Marble Corporation is considering a merger with the Conroy Concrete Company. Conroy is a publicly traded company, and its beta is 1.30. Conroy has been barely profitable, so it has paid an...

The Prad Corporation is considering a merger with the Stone Company which has 400,000 outstanding shares. An investment banker has advised that to succeed in its merger Prad Corp. would have to offer...

Mistral Amsted Shares (In millions) 1.2 0.8 Price per Share $22 $23 Mkt Value (In millions) $26.40 $18.40 (Shares * Price per Share) WACC 10% Estimated Value of Combined Firms (In Millions) $50.00...

Synergy Mistral Software is considering a merger with Amsted Technologies. Mistrai has 1.2 million shares outstanding with a value of $22, while Amsted has 800,000 shares outstanding with a $23...

Mistral Software is considering a merger with Amsted Technologies. Mistral has 1.2 million shares outstanding with a value of $22 per share, while Amsted has 800,000 shares outstanding with a $23...

Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...

Total of 21 questions to answer. Some questions are already done and answer is highlighted yellow. Due tonight at 12PM so please do before 11pm. Explanation on math portion preferred. QUESTION 1 1....

financial SUBDOMAINS: 325.4 COMMUNICATING EFFECTIVELY IN ORGANIZATIONS 326.1 MANAGING INTERNAL COST & CONTROLLING FINANCES 326.2 MANAGING CAPITAL & FINANCIAL ASSETS 326.4 MANAGING ENTERPRISE RISK &...

Explain the difference between materially participating and actively participating in an activity. When is the active participation test used?

EXAMPLE 10.8 The end block of a post-tensioned prestressed concrete beam, 300 mm wide and 300 mm deep, is subjected to a concentric anchorage force of 832800 N by a Freyssinet anchorage of area 11720...

Bill and Emeny live in a state that requires that contracts involving transactions over $ 1 , 0 0 0 must be in writing. If they enter an oral agreement to exchange a plece of landscaping equipment...

If a business venture has a 60-percent chance to earn $2 million and a 20-percent chance to lose $1.5 million, what is the expected monetary value of the venture? a. $50,000 b. $300,000 c. $500,000...

The Edelman Gem Company, a small jewelry manufacturer, has been successful and has enjoyed a good growth trend. Now Edelman is planning to go public with an issue of common stock , and it faces the...

Jan Volk, financial manager of Green Sea Transport (GST), has been asked by her boss to review GSTs outstanding debt issues for possible bond refunding. Five years ago, GST issued $40,000,000 of 11...

Bird's Eye Treehouses, Incorporated, a Kentucky company, has determined that a majority of its customers are located in the Pennsylvania area. It therefore is considering using a lockbox system...

Scenario: A therapist wanted to examine marital happiness in couples participating in therapy at her clinic. Couples were randomly assigned to participate in individual, couples, or group therapy....

If sales volume decreases, and all other factors remain unchanged, the contribution margin ratio will decrease - Vf. 1. 2. In two companies making the same product and with the same total sales and...