What do think is the reason for the merger

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Links Ltd., a logistics company, is considering buying a smaller competitor in the same industry it operates in. The competitor, Smartmove Ltd., is a more technologically advanced, but resource limited, company. The management of Links Lid. feels that the company could incorporate the technology Smartmove Ltd. has developed to realise significant cost savings and better their customer experience and therefore increase revenue. The potential customer base acquired from Smartmove Lid. would be inconsequential to a company of Links. Ltd.'s size and does not factor into the decision. Links Lid. wants to acquire 100% of the outstanding shares of Smartmove Ltd. given the sensitivity of the technology to its business competiveness. Links Lid. plans to use an issue of shares to fund the acquisition. Links. Ltd. has 100m shares in issue currently trading at R10 apiece and EPS of R1.00 while Smartmove Ltd. has 10m shares in issue trading at R1 apiece with EPS of RO. 10. Synergistic earnings of R5m per year is expected post the merger.

Question 1: What do you think is the reason for the merger

Reference no: EM132652437

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