Abbvie is acquiring Aztra. Abbvie is offering a 30% premium over the Aztra pre-announcement price and the offer is to be paid 40% in cash and 60% in stock. The pre-announcement share price of the companies were $30 (Abbvie) and $20 (Aztra) per share.

Is the deal accretive or dilutive? Specifically, what is the amount of accretion or dilution for the next fiscal year after the deal. Consider the following assumptions:

1. Assume that the cash portion of the deal is going to be financed issuing new debt. The interest expense on the new debt issued is 4% per year.

2. For simplicity, assume no transaction or financing fees.

3. Pre-tax deal synergies are $2,318;

4. The effective tax rate of the combined entity after the acquisition is 20%;

5. The total write-up of target's tangible plus intangible assets is $3,000 with straight-line depreciation and amortization over 10 years;

Wall Street analysts' estimates, before the deal announcement, for the next fiscal year for both companies are:

Mean Estimates	Abbvie (acquirer)	Aztra (target)
Net Income ($)	8,000	2,000
EPS ($)	2.00	1.33
Diluted Shares Out	4,000	1,500

The EPS $Accretion or ($Dilution) amount is:

(Enter the $ accretion as positive number, and $ dilution as a negative number. Enter $ amounts not %)

Answer rating: 100% (QA)

In a bid to determine whether or not the deal is accretive or dilutive we are simply comparing the earnings per share of the acquirer prior to the dea... View the full answer