Cartel Corporation is acquiring the Superior Corporation. Neither firm has any debt outstanding. Cartel has 150 million shares of stock outstanding with a market price of $30 per share. Superior has 100 million shares of stock outstanding with a market price of $14 per share.  Cartel's advisors estimate the value of synergy today to be $140 million.

 

a.  What is the estimated market value of the combined companies? 

b.  Suppose Cartel pays $1.5 billion in cash to buy 100 percent of the common stock of Superior.  What is the NPV of the merger?  

c.  If Cartel offers 25% of the combined firm's stock to Superior's shareholders, what is the NPV of the merger?

Answer rating: 100% (QA)

Cartel and Superior Merger Analysis Heres the analysis of the Cartel and Superior merger a Estimated ... View the full answer