Reference no: EM133124676
Question - A 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?
c. If the shareholders of B Ltd act together as a Group, will they benefit in terms of price being offered? If so & if not, give reasons.
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