[Ans. Yes] Hopeful Ltd. wishes to acquire Faithful Ltd. The details are as follows Hopeful | Faithful Ltd. Ltd. Geet Earnings after tax 3,00,000 | 60,000 No of Equity Shares 1,50,000 60,000 MP. per share 20 8 i) Calculate the number of shares required to be issued by Hopeful Ltd. for acquisition of Faithful Ltd. ii) What will be the exchange ratio on the basis of market price? iii) What is P/E Ratio of the two Companies? iv) What is EPS after acquisition? [Ans. (i) 48,000 (ii) 0.4 (iii) 10, 8 (iv) & 1.82]neg ee Ea te aint (EPS Pre & Post merger) 6/ XYZ Lid. is considering merger with ABC Ltd. XYZ. Ltd's shares are curently traded at & 20. th NM aaiaies ante es ‘camings after taxes (EAT) amount to & 5,00,000. ABC Lid 1.25,000 shares outstanding; its current market price is € 10 and its EAT are & 1,25,000. The Will be effected by means ofa stock swap (exchange). ABC Ltd, has agreed toa plan under which X Ld, wil offer the curent market value of ABC Lid.'s shares ') What isthe pre-merger earnings per share (EPS) and PYE ratios ofboth the companies? ')) ABC Lids PIE ratio is 64, what is its curent market price? What isthe exchange ratio? Wh will XYZ. Lid’ post-merger EPS be? tii) What should be the exchange ratio, if XYZ. Li [Ans. i) XYZ ABC che ee PE 10 19 76.40, 3.125, 216 ) 0.50)and Acquisitions person Aor or 1 gps Pre-merger & Post merger) y XZ Consideting merger with ABC Ltd. XYZ Lids shares are currently traded at 25 it has 7 290,000 shares outstanding and its earning ater taxes (EAT) amount to & 400,000, ABC Ltd. hss 1,00,000 shares outstanding; its current market price is & 12.50 and its EAT is € 1,00,000. The merger will be effected by means of a stock swap (exchange). ABC Ltd. has agreed to'a plan under which XYZ Ltd, will offer the current market value of ABC Ltd.'s shares. })_ What is the pre-merger earnings per share (EPS) and PIE ratios ofboth the companies? IfABC Ltd.’s P/E ratio is 8, what is its current market price? What isthe exchange ratio? What will XYZ Ltd.’s post merger EPS be? {ify What must the exchange ratio be for XYZ Ltd.'s pe-merger and post-merger EPS to be the same? fans. i) EPS%2;1P/E 125,125 ii) MP. of ABC 8 ; Ex Ratio 8/25 iii). Pre EPS XYZ%2 Post XYZ 2]- ee ease sic Reliable tn CNL) is conside O lering a takeover of Sunflower Industries ‘The particulars of 2 companies ate given below, f Sunflower Industries Ltd (SIL). Sunflower Industries! Lid Particulars a ngs After Tax (ER lable Industries Lid Eau shares 0/3 ©20,00;000 070,000, Earnings Per Share (EPS) 10,00,000 | 10,00,000 PE Ratio (Times) 2 1 Required : i) What isthe market value of each Company before merger? ii) Assume that the management of RIL estimates that the shareholders of SIL will accept an offer of ‘one share of RIL for four shares of SIL. If there are no synergic effects, what is the market value of the Post-merger RIL? What is the new price per share? Are the sharcholders of RIL better or worse off than they were before the merger? ii) Due to synergic effects, the management of RIL estimates that the eamings will increase by 20%. What is the new post-merger EPS and Price per share? Will the shareholders be better off or worse off than before the merger? i) RIL®20,SIL?5 ii) Post Merger effect on RIL EPS 2.4 MP. 10, M.V.%24 New M.P. % 28.80] [An(Coleen a inn nese ts provided releting 20 Ge STN N The following information isp palthy Led re sen ae aE eae i 2750 Lakhs ang oe kecae caste * sine = 165 Lakhs dal. csrouait sao eee vera ae Thave decided to give a fair deal to the shareholders of Diets of bot te companies z Board of Dinca of at oe ae desided as AM, 25% and 35% respectively for earing, Value and market price of share of each company j) Calculate the swap ratio and also calculate Promoter's holding % after acquis ii) Whatis the EPS of Efficient Ltd after acquisition of Healthy Ltd.? iit) What is expected market price per share and market capitalization of Efficiency Ltd. acquisition, assuming P/E ratio of Frm Efficient Ltd. remains unchanged. iv) Celeulate free float market capitalization ofthe merged firm. Ans. i) BV per share € 40, € 32; MV. per share € 50, 100; EPS @ 5, wap El BV I: MP. 1:2 Promoter's balding 125,000 shares Le 60% 7 © a? PPS | ii) EPS6.956 iil) MPS 69.56 iv) %79994 Lakhs} (Evaluation of Merger) 15, You work in AB Led. Your Finance Director plane é. ...‘The following. information is provided relating to the acquiring company E Ltd. and the tage Company H Ltd ES 15 Lake ‘Number of Shares ‘(Face Value €10 each) 20 Lakhs Market Capitalization £1,000 Lakhs | € 1,500 Laks P/E Ratio (Times) 10 : Reserves and Surplus £600 Lakhs | 930 Lakhs Promoters’ Holding (Wo, of Shares) 19.50 Lakhs | __10 Lakhs "The Board of Directors of both the companies have decided to give ® ‘Accordingly, the weights are decided as 40%, 25% and 35% respectively for earnings, price of share of each company for swap ratio. Caleulate the following : 3). Market price per share, eamings per share and book value per share ii) Swap Ratio iif) Promoters’ holding percentage after acquisition. iv) EPS of E Ltd. after acquisitions of H Ltd. 4). Expected market price pr share and market capitalization of E Lid; after acquis ratio of E Ltd. remains unchanged; and vi) Free float market capitalization of the merged firm. ‘book value and markeowe or iu which ee 18 ow many shares of 1 Li shoo ans Net ass aguited ©8280 rohan Rati) Is ABN Particul te lr of sam Ld ed a ‘es ts aoee eee ee Pla Fine! Management EEBCA. «Sam = VD over iG Goes 6 ned i icc sie Abe ised Yo aque A Ld. without any acquisition of wom”? 1000; No.of shares 46,00) ne Jo # subd —aahiman 1a. [Owe a aera ee | — = Petra sae yom | ania ‘Paid Up Valve Per Share C900 100, fig ree Float Market Capitalization eso tate | © 156k P/E Ratio (Times) awn Li, treed dig assigned bythe Bead of lana Book Value : 25% Baring Per Sha: 50% Market Price :25% ‘You ae reuited to compute }) Theswaprato i) The book val 1, caing pe share and expected mat tatio of Abhiman rat emai the same and al ae ave hima Lid. (assuming het ro sabia Lid Eis of Ss over at book va). (ans. Snap Ratio BV Bais 1.1273 EPSHass 1195 MPBais 1:78) (ate of Synerey) 19. The flowing are the dis fro mergercnates NL and @ Seer are a Revemaee Cont of Goods Sold (Exctuding Depeciaton) Deprecaton| ‘Tax Rate Working Capital of Revenue) Market Vale of Buty Outstanding Debt ie | ts ser rae pedals gow a yearn pepeay, Copia apedng i expected 10 be ol at a fbn inns ae med BBB, wih an erent ate on thir of £.% er fo eis 79 sr ofthe merger he combined fim is expected to have a cost of gods sold only 86% of “Te combined form does ot plant to borrow atonal deb. You ate reuitedtextinat th alo he combined firm, with no syne: {tint he value ofthe combined im, with ser. ns (a) € 946.38 Lakhs () C7575 Laks vor20 Weel OF 1068 Of Merger) Seeing information ts pro ‘rhe following, is provided related to the acquiring firm Mark Limited and the target firm sys ait Particulars cumned Farming After Tax ta Mark Limited | Mask Limited enper of Shares Outstanding 72,000 Lakhs | © 400 Lakhs pye Ratio (Times) 200 Lakhs | 100 Lakhs Required : act 5. jy What is the swap ratio based on current is the sv rent mark ‘ ii) What is Es EPS of Mark Limited after. eae ii it is the ex; market pri a ii) et fe specie market price per share of Mark Limited after acquisition, assuming P/E i imited remains unchanged? “i eee jy) Determine the market value of the met ged firm, y) Calculate gain / loss for shareholders of the two independent companies after acquisition