LOS m: Evaluate a merger bid, calculate the estimated post-merger value of an acquirer, and calculate the gains accrued to the target shareholders versus the acquirer shareholders. ffice ffice" />
Q1. Big Steel is considering making a bid for Small Steel. The following data applies to the analysis:
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Big Steel |
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Small Steel |
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Pre-merger stock price |
$75 |
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$100 |
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Number of shares outstanding |
ffice:smarttags" />500m |
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40m |
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Pre-merger market value |
$37,500m |
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$4,000m |
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Estimated synergies |
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$600m |
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If Big Steel buys Small Steel for $110 per share in cash, what are the gains to Big Steel and Small Steel, respectively?
Big Steel Small Steel
A) $400m $200m
B) $500m $100m
C) $200m $400m
Correct answer is C)
Gains to Small Steel = takeover premium = $4,400 – $4,000 = $400m.
Gains to Big Steel = synergies – takeover premium = $600 – $400 = $200.
Q2. Big Steel is considering making a bid for Small Steel. The following data applies to the analysis:
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|
Big Steel |
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Small Steel |
|
Pre-merger stock price |
$75 |
|
$100 |
|
Number of shares outstanding |
500m |
|
40m |
|
Pre-merger market value |
$37,500m |
|
$4,000m |
|
Estimated synergies |
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$600m |
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If Big Steel buys Small Steel by exchanging 1.45 shares of its stock for each share of Small Steel, what are the gains to Big Steel and Small Steel, respectively?
Big Steel Small Steel
A) $223.9m $376.1m
B) $100.8m $491.3m
C) $246.2m $353.8m
Correct answer is A)
Value after takeover = $37,500 + $4,000 + $600 = $42,100m.
Shares exchanged for Small Steel = 1.45 × 40m = 58m.
Post-takeover share price = value after takeover / shares outstanding = 42,100m / 558m = $75.45.
Takeover price = number of shares to small steel × post-takeover share price = 58m × $75.45 = $4,376.1m.
Gains to Small Steel = takeover premium = $4,376.1 – $4,000 = $376.1m.
Gains to Big Steel = synergies – takeover premium = $600 – $376.1 = $223.9m.
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发表于 2009-3-3 16:32
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