Blenheim PLC has a market value of $125 million and 5 million shares outstanding. Howard Department Store

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Blenheim PLC has a market value of $125 million and 5 million shares outstanding. Howard Department Store has a market value of $40 million and 2 million shares outstanding. Blenheim is contemplating acquiring Howard. Blenheim’s CFO concludes that the combined firm with synergy will be worth $185 million, and Howard can be acquired at a premium of $10 million.

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?

b. What exchange ration between the two stocks would make the value of a stock offer equivalent to a cash offer of $50 million?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...

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Related Book For book-img-for-question

Fundamentals of Corporate Finance

ISBN: 978-0071051606

8th Canadian Edition

Authors: Stephen A. Ross, Randolph W. Westerfield

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Question Posted: Jul 17, 2019 08:04 AM

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Blenheim PLC has a market value of $125 million and 5 million shares outstanding. Howard Department Store

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a The number of shares after the acquisition will be the current number of shares outstanding for th...View the full answer

Fundamentals of Corporate Finance

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