Describe how the market views the merger

Assignment Help Financial Accounting

Reference no: EM132808815

Large Co, an all-equity firm with 200 million shares outstanding and $1,000 million of equity(share price $5), wants to buy Target Co. Target Co. is an all-equity $100 million firm with 2 million shares outstanding (Share price $50). Together they will generate synergy values of $100 million.

After negotiations, Large Co. and Target Co. agree to allocate the synergy value equally. Large Co. will compensate Target Co. shareholders with 50% cash and 50% shares.

Problem 1: Assuming efficient markets, prepare the market value balance sheet after acquisition is complete. Provide the details.

Problem 2: calculate the number of Large Co shares that Target Co shareholders will receive in exchange for their Target Co shares.

Problem 3: Assume the market values this merger differently than the firms value this merger. Upon announcement the shares of both Large Co. and Target Co. increased. Large Co. increased 3% and Target Co. increased 20%. Using the share price information, describe how the market views the merger. Based on the market reaction, did the acquirer or the target get the most value?

Reference no: EM132808815

Questions Cloud

Define what is interpersonal skill : 1) Define what is interpersonal skill. 2) Give 3 disadvantages of oral communication.

How does a recipient not-for-profit entity record receipt : How does a recipient not-for-profit entity record the receipt of a gift that will be transferred without restriction to another charitable entity?

What the fund manager total return is closest to : The contract multiplier is $250. Assume the manager finances her margin deposit at one-year Libor, which is 3.375%. The fund manager total return is closest to

What price of the index will the retail investor be : Each futures contract has a multiplier of $50. At what price of the S&P 500 Index will the retail investor be asked to post maintenance margin?

Describe how the market views the merger : Using the share price information, describe how the market views the merger. Based on the market reaction, did the acquirer or the target get the most value?

BUS6001 Contemporary Management Issues Assignment : BUS6001 Contemporary Management Issues Assignment Help and Solution, Arden University - Assessment Writing Service

National tradition of human resource practice : Why in some instance national tradition of Human Resource practice start to breakdown?

Six preliminary assessment for screning : Compare and contrast the six preliminary assessment for screning in/out employees applications. Discuss the following considerations for each of these six

How does the act define a workplace : How does the Act define a Workplace? Based on this definition, would you consider an office holiday party located offsite

User Account

All Pages