Thruster plc is a dynamic, expanding business. Relaxation plc is a solid but unambitious one operating in the same industry. Thruster plc has recently launched a takeover bid for Relaxation plc. The offer is that Thruster plc will give one of its shares to shareholders in Relaxation plc for every three of their shares.

After-tax cost savings are estimated to be £8 million p.a. as a result of administrative efficiencies, compared with the total costs historically incurred by the two businesses. Summarised financial statements for the two businesses for the year just ended are as follows:

Observers believe that, following the takeover, the P/E ratio of Thruster plc will be 16.
Assuming that the market value of their shareholdings is the only factor of concern, would the shareholders of each business welcome a successful takeover?

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Turnover Profit before tax Taxation Profit after tax Dividends paid Income statement Non-current assets Current assets Total assets Equity: Ordinary shares of 0.50 each Reserves Long-term liabilities Current liabilities Total equity and liabilities Pre-bid price/earnings ratio (P/E) Thruster plc m 650 72 24 48 Statement of financial position as at the end of the year just ended Thruster plc m 350 160 510 170 110 280 Relaxation plc m 180 50 510 18 200 17 6 11 5 Relaxation plc m 200 90 290 90 100 190 60 40 290 14