Case synopsis:
Company B has been planning from the past 6 months to merge with Company H. After few discussions, it has decided to make a cash offer of $250 million for Company H. Person B, the financial officer of Company B, has been involved in the negotiations of merger.
He has prepared a pro forma financial statements for Company H assuming that the merger will take place. If Company B purchases Company H, then there will be an immediate payment of dividend. Person B has identified the interest rate of borrowing for both the companies.
Characters in the case:
- Company B
- Company H
- Person B
Adequate information:
- Both the companies that are planning to merge have niche markets in the industry of golf club.
To calculate: The highest exchange ratio that Company B will be willing to pay for the merger.
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Fundamentals of Corporate Finance, 11th Edition (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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