EXERCISE 2
Based on the information below, show:
(i) Uses & sources
(ii) Balance sheet impacts
(iii) Accretion dilution for three years
Company A is planning to acquire 100% of company B paying a premium of 30% over market.
Company A will need to pay all existing financial debt in company B.
Company A will use all existing cash in target, 4x EBITDA leverage and new equity to finance the transaction.
50m will be paid in terms of fees to advisors and 10m to the bank syndicate for setting up the debt.
Interest on new debt issued by A is 6%, interest on Co. B debt repaid is 4%.
Old debt repaid matured in 20 years linearly (every year 992.38m are paid back)
New debt issued is repaid linearly over a 10 year period
No syniergies nor restructuring costs
Tax rate is 25%	25%
		Co. A (Buyer)	Co. B (Target)
EBITDA		7,360.00	3,600.00		Price Premium	30%
Number of shares (m)		6,400.00	4,640.00
Share price		13.00	2.00
EPS Y1		9.04	3.36		Equity buyout
EPS Y2		10.96	3.12
EPS Y3		12.88	3.68