A limited is considering making a tender offer for B Ltd. The merger would result in economies of scale (Benefit of synergy) of Rs.27 lakh.

The relevant financial information for B Ltd. is as follows:

Number of shares outstanding 2,00,000

Earnings per share Rs.12 Market price per share Rs.76

A Limited intends to make a two-tier tender offer wherein it will offer Rs.90 for the first 1, 00,000 shares and Rs.75 for the remaining shares.

a. If the tender is successful, how much should A Ltd pay to B Ltd.?

b. If the Economies of merger is Rs.27, 00,000, How much of this goes to the Shareholders of A Ltd & B Ltd respectively? How much are the shareholders of A Ltd. And B Ltd. benefitting from the economies of merger?

c. If the shareholders of B Ltd act together as a Group, will they benefit in terms of price being offered? If so & if not, give reasons.