Consider two companies. Rearden Metal has earnings per share of €2, 10 million shares outstanding and its current stock price is €20. Associated Steel, has earnings per share of €1,25, 4 million shares outstanding, and a stock price of €15 Rearden Metal is thinking of buying Associated Steel and will pay for Associated Steel by issuing new shares. Rearden Metal expects no synergies from the acquisitior Assume that Rearden Metal offers an exchange ratio such that, at current pre-announcement share prices for both firms, the offer represents a 20% premium to buy Associated Steel. a) Compute the price per share of the Rearden Metal that should be observed immediately
Consider two companies. Rearden Metal has earnings per share of €2, 10 million shares
outstanding and its current stock price is €20. Associated Steel, has earnings per share of €1,25,
4 million shares outstanding, and a stock price of €15
Rearden Metal is thinking of buying Associated Steel and will pay for Associated Steel by issuing
new shares. Rearden Metal expects no synergies from the acquisitior
Assume that Rearden Metal offers an exchange ratio such that, at current pre-announcement
share prices for both firms, the offer represents a 20% premium to buy Associated Steel.
a) Compute the price per share of the Rearden Metal that should be observed immediately
after the acquisition public announcement.
b) Compute the price per share of the Associated Steel that should be observed immediately
after the acquisition public announcement.
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