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What will the stock price of blenheim be

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Reference no: EM132929219

Blenheim PLC has a market value of $139 million and 5 million shares outstanding. Howard Department Store has a market value of $30 million and 2 million shares outstanding. Blenheim is contemplating acquiring Howard. Blenheim's CFO concludes that the combined firm with synergy will be worth $195 million, and Howard can be acquired at a premium of $10 million.

Problem a. If Blenheim offers 1.2 million shares of its stock in exchange for the 2 million shares of Howard, what will the stock price of Blenheim be after the acquisition?

Problem b. What exchange ratio between the two stocks would make the value of a stock offer equivalent to a cash offer of $40 million?

Reference no: EM132929219

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