Company X is considering acquiring company Y. You are provided with the information below. X Y EPS
Question:
Company X is considering acquiring company Y. You are provided with the information below. X Y EPS £4.00 £1.00 Dividend/share £2.50 £0.9 Number of shares 1 million 0.6 million Share price £80 £24 Additionally, you estimate that investors currently expect a steady growth of about 6% in company Y’s earnings and dividends. After the acquisition, this growth rate would increase to 7.75% per year, without any additional capital investment required.
a. Calculate the synergies from the acquisition?
b. What is the premium paid to company Y’s shareholders from the acquisition if company X pays £30 in cash for each share of company X?
c. What would instead be the premium to company Y’s shareholders from the acquisition if company X offers $12 cash plus one share of company X for every five shares of company Y?
Business Communication
ISBN: 978-1439080153
8th edition
Authors: Buddy Krizan, Patricia Merrier, Joyce P. Logan, Karen Schneiter Williams