Suppose that the price of the target firm 43 is after the announcement. The acquirer's share price is 74 after the announcement, and it is 82 on the deal completion date. The acquirer offers to exchange 0.679 shares of the acquirer for each share of the target at the completion of the deal. Compute the return for a merger arbitrageur assuming that the deal is successful. The answer should be given_in decimal form with three decimals. For example, write 0.105 instead of 10.5 or 10.5 % when the correct answer is 10.5 %.
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- The NFF Corporation has announced plans to acquire LE Corporation. NFF is trading for $ 25 per share, and LE is trading for $ 29 per share, implying a pre-merger value of LE of approximately $ 7.3 billion. If the projected synergies are $ 1.27 billion, what is the maximum exchange ratio NFF could offer in a stock swap and still generate a positive NPV?Finance Loki Inc. and Thor Inc. have entered into a stock swap merger agreement whereby Loki will pay a 35% premium over Thor’s pre-merger price. A. If Thor’s pre-merger price per share was $37 and Loki’s was $52, what exchange ratio will Loki need to offer? B. On the day of the merger announcement, the increase in Thor (the target firm’s) stock price will be ______(higher/lower) than 35% (the takeover premium). C. Based on your answer in part B of this question, explain why you think Thor’s stock price increase will be higher or lower than the takeover premium at the time of the merger announcement.Consider the following data in relation to a proposed acquisition, where Firm B will take over Firm A in a horizontal takeover. Pre-merger Value A $550m Pre-merger Value B $420m Post-merger Value A + B $1,150m Cash Offer $580m Share Offer 52% of Shares in A + B Estimate the gains available from the merger. Estimate the value of the merger to firm A’s shareholders under both the cash and share offer. Estimate the value of the merger to firm B’s shareholders under both the cash and share offer. Which offer will predominate, cash or shares, if the shareholders of A are given the choice?
- Consider the following premerger information about a bidding firm (Firm B) and a target firm (Firm T). Assume that both firms have no debt outstanding. Firm B Firm T Shares outstanding 6,400 1,600 Price per share $ 48 $ 19 Firm B has estimated that the value of the synergistic benefits from acquiring Firm T is $8,900. a. If Firm T is willing to be acquired for $21 per share in cash, what is the NPV of the merger? b. What will the price per share of the merged firm be assuming the conditions in (a)? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If Firm T is willing to be acquired for $21 per share in cash, what is the merger premium? d. Suppose Firm T is agreeable to a merger by an exchange of stock. If B offers one of its shares for every two of T's shares, what will the price per share of the merged firm be? (Do not round intermediate calculations and round your answer to 2…Denali Inc. is acquiring Whitney Corp. at an exchange ratio of 2:1. After the deal is announced, Denali’s stock price is $25 and Whitney’s stock price is $47. Create a trade that would take advantage of the merger arbitrage opportunity, starting with 100 shares of Whitney’s stock. Show in detail the profit from your portfolio if between today and the deal being completed, Denali’s stock price falls to $20.Which is a more attractive deal to invest in, from a merger arbitrage point of view? Deal A with 2.5 months to complete, cash deal, 2.20% spread Deal B with 13 months to complete, share for share deal, 8.20% spread Deal C with 7.5 months to complete,cash deal, 4% spread
- KT corporation has announced plans to acquire MJ corporation. KT is trading for $45 per share and MJ is trading for $25 per share, with a premerger value for MJ of $3 billion dollars. If the projected synergies from the merger are $750 million, what is the maximum exchange ratio that KT could offer in a stock swap and still generate a positive NPV? It is closest to: Answer choices: A) 0.75 B) 3.30 C) 2.25 D) 1.30Loki, Inc. and Thor, Inc. have entered into a stock-swap merger agreement whereby Loki will pay a 39% premium over Thor's pre-merger price. If Thor's pre-merger price per share was $42 and Loki's was $51, what exchange ratio will Loki need to offer? a. 1.42 shares of Loki for each share of Thor b. 0.72 shares of Loki for each share of Thor c. 0.86 shares of Loki for each share of Thor d. 1.14 shares of Loki for each share of ThorConsider the following information about Firm A and Firm T: Item Firm A (Acquiring firm) Firm T (Target firm) Price per share $20 $15 Outstanding shares 50 25 Total market value $1000.00 $375 Total cost of the acquisition is $500.00 and the merger is estimated to create a synergistic gain of $700.00. What is the merger premium? Select one: a. $150.00 b. $135.00 c. $125.00 d. $175.00
- A merger between Minnie Corporation and Mickey Corporation is under consideration. The financial information for these firms is as follows: Minnie Corporation Mickey Corporation Total earnings $1,682,000 $2,581,000 Number of shares of stock outstanding 290,000 890,000 EPS $5.80 $2.90 P/E ratio 10X 20X Market price per share $58 $58 a. On a share-for-share exchange basis, what will the postmerger EPS be? (Round the final answer to 2 decimal places.) Postmerger earnings per share $ b. If Mickey Corporation pays a 25 percent premium over the market value of Minnie Corporation, how many shares will be issued? (Do not round intermediate calculations.) Shares issued shares c. With the 25 percent premium, what will the postmerger EPS be? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Postmerger earnings per share $Firm X is going to acquire Firm Y. The acquisition will be done via a share exchange, whereby Firm X will exchange two of its shares for every one of Firm Y’s shares. Synergy is $1,500,000 in total. Firm X (Bidder) Firm Y (Target) Shares Outstanding 1,500,000 150,000 Price per Share $50 $80 Earnings 2,400,000 1,950,000 43. What is the takeover premium in dollars? (Tip: round the share price of the combined firm to two decimal places in calculating your answer.) A) $5,700,000 B) $1,500,000 C) $2,751,000 D) $2,500,000 E) $3,000,000A limited is considering making a tender offer for B Ltd. The merger would result in economies of scale (Benefit of synergy) of Rs.20 lakh. The relevant financial information for B Ltd. is as follows: Number of shares outstanding 1,80,000 Earnings per share Rs.12 Market price per share Rs.76 A Limited intends to make a two-tier tender offer wherein it will offer Rs.82 for the first 1, 00,000 shares and Rs.75 for the remaining shares. a. If the tender is successful, how much should A Ltd pay to B Ltd.? b. If the Economies of merger is Rs.20, 00,000, How much of this goes to the Shareholders of A Ltd & B Ltd respectively? How much are the shareholders of A Ltd. And B Ltd. benefitting from the economies of merger?