Apollo Healthcare Inc is an all equity firm that has 100 shares outstanding which are currently trading at $100 a share Thor Healthcare Inc is a competing all equity financed firm with 200 shares outstanding which are currently trading at $50 a share Apollo is considering acquiring Thor Investors did not anticipate any merger in the healthcare industry, and accordingly any potential merger synergies are not reflected in the firms previously mentioned stock prices Assume that markets are efficient and that there are no asymmetric information issues between the market and the firms Also, assume that, in each of the following cases, the market believes that the deal will go through as is swiftly with certainty Suppose the present value of the expected synergies from the acquisition is $5,000 Suppose Apollo has decided to make a cash offer for the acquisition of Thor What is the maximum price per share that Apollo can offer to Thor shareholders What is the NPV of the acquisition for Apollo in this case What are the share prices of Apollo and Thor after the announcement of this offer (8 points) Suppose the present value of the expected synergies from the acquisition is $5,000 Apollo has decided that it will make a share exchange offer for the acquisition of Thor (i e , no cash payment) such that Apollos shareholders keep 60 of the synergy value created by the deal i How many new shares will Apollo issue to Thors shareholders in the share exchange offer (5 points) ii What will the share price of Apollo be after the announcement of the share exchange offer (5 points) Ignoring Parts (a) and (b) above, now suppose that Apollo announces that it will purchase Thor via a combination of cash and stock exchange offer Apollo will pay Thors shareholders $4,000 in cash and will issue 90 shares to Thors shareholders After the announcement of this offer to buy Thor, Apollos share price drops by 10 i What is the markets expectation of the synergies to be gained in total from the deal (provide a quantitative answer) (5 points) ii Based on the market reaction, calculate the NPV of the acquisition to Apollos shareholders and the premium Thors shareholders receive (5 points)

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Apollo Healthcare Inc. is an all-equity firm that has 100 shares outstanding which are currently trading at $100 a share. Thor Healthcare Inc. is a

Apollo Healthcare Inc. is an all-equity firm that has 100 shares outstanding which are currently trading at $100 a share. Thor Healthcare Inc. is a competing all-equity financed firm with 200 shares outstanding which are currently trading at $50 a share. Apollo is considering acquiring Thor. Investors did not anticipate any merger in the healthcare industry, and accordingly any potential merger synergies are not reflected in the firms previously mentioned stock prices. Assume that markets are efficient and that there are no asymmetric information issues between the market and the firms. Also, assume that, in each of the following cases, the market believes that the deal will go through as is swiftly with certainty.

Suppose the present value of the expected synergies from the acquisition is $5,000. Suppose Apollo has decided to make a cash offer for the acquisition of Thor. What is the maximum price per share that Apollo can offer to Thor shareholders? What is the NPV of the acquisition for Apollo in this case? What are the share prices of Apollo and Thor after the announcement of this offer? (8 points)
Suppose the present value of the expected synergies from the acquisition is $5,000. Apollo has decided that it will make a share exchange offer for the acquisition of Thor (i.e., no cash payment) such that Apollos shareholders keep 60% of the synergy value created by the deal. i. How many new shares will Apollo issue to Thors shareholders in the share exchange offer? (5 points) ii. What will the share price of Apollo be after the announcement of the share exchange offer? (5 points)
Ignoring Parts (a) and (b) above, now suppose that Apollo announces that it will purchase Thor via a combination of cash and stock exchange offer. Apollo will pay Thors shareholders $4,000 in cash and will issue 90 shares to Thors shareholders. After the announcement of this offer to buy Thor, Apollos share price drops by 10%. i. What is the markets expectation of the synergies to be gained in total from the deal (provide a quantitative answer)? (5 points) ii. Based on the market reaction, calculate the NPV of the acquisition to Apollos shareholders and the premium Thors shareholders receive. (5 points)