Calculate the merged firm share price

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LTD firm plans to launch a takeover of NHM firm. The deal is expected to generate a present value of synergies totalling $135 million. A cash offer will be made that pays the fair price for NHM's shares plus 65% of the total synergy value. The cash will be paid out of LTD's cash holdings, no new debt or equity will be raised.

 

LTD

NHM

Assets ($m)

6,500

750

Debt ($m)

5,300

450

Share price ($)

60

20

Number of shares (m)

20

15

Ignore transaction costs and fees. Assume that firms' debt and equity are fairly priced, and that each firms' debts' risk, yield and values remain constant. The acquisition is planned to occur immediately, so ignore the time value of money.

Calculate the merged firm's share price (keep 2 decimal points)  and total number of shares after the takeover has been completed. 

Reference no: EM133061429

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