$(2023)$ Question $1\mathrm{.}2$

Arcane Investments Ltd$.,$ a diversified educational service provider, proposed an acquisition offer of Tomes Ltd$.,$ an academic book retailer. Arcane Investments Ltd$.$ offers an exchange ratio of $0\mathrm{.}40$ with its share price currently trading at R$5\mathrm{.}20$ and the target company, Tomes Ltd$.,$ trading at R$1\mathrm{.}50.$ Tomes Ltd$.$s board recommended that its shareholders only accept an offer with a market premium over $10\%$ as it considers its current share price to be undervalued.

Determine the market premium and discuss the type of takeover Arcane Investments Ltd$.$ is proposing. Argue whether Tomes Ltd$.$ should accept the offer based on your calculations.