Cathay Pacific agrees deal to take over budget airline HK Express, sources say Cathay Pacific Airways has agreed a deal to acquire budget airline HK Express, according to sources familiar with the matter. Hong Kong's biggest airline is poised to make a formal announcement as early as Tuesday, though the sources did not elaborate on the agreement between the two sides, including the financial terms. Facing competitive pressures from a trio of rivals including no-frills carriers, jumping into the low-cost travel market could allow Cathay Pacific to attract budget-conscious travellers it does not already serve. Three weeks ago, Cathay Pacific confirmed it was in active discussions to acquire HK Express from debt-ridden Chinese conglomerate HNA Group. The financial concerns of the parent group have spread to Hong Kong Airlines, the full-service sister airline of the low-cost carrier, which was not being considered in the deal, the company said at the time. Both companies have sought to play down progress on the talks since they were officially confirmed on March 5, insisting that discussions were continuing, giving rise to concerns a deal could not be reached. The confirmation of the deal would mean Cathay Pacific is officially jumping into low-cost travel, using an airline vehicle designed for budget travel, without having to cannibalise the luxury, premium offering from its flagship brand, in its first major acquisition since buying Dragonair in 2006, now renamed Cathay Dragon. Assume that both firms have no debt outstanding. Cathay Pacific has estimated that the value of the synergistic benefits from acquiring HK Express is $6,000. Cathay Pacific 3,400 Shares outstanding Price per share HK Express 1,500 $18 $43 Source: Adapted and modified from Lee D., 'Bear market offers chance for mid-caps to issue convertible bonds. 2019 March 25. South China Morning Post. Answer the following questions. (a) Calculate the net present value of the merger if HK Express is willing to be acquired for $20.50 per share in cash. (b) Evaluate the price per share of the merged firm assuming that the conditions in (a). (c) If HK Express agrees to a merger by an exchange of stock, Cathay Pacific will offer one of its shares for every two of HK Express's shares. Advise the price per share of the merged firm. (d) Discuss two reasons supporting and two reasons opposing the above acquisition. No calculation is needed. Cathay Pacific agrees deal to take over budget airline HK Express, sources say Cathay Pacific Airways has agreed a deal to acquire budget airline HK Express, according to sources familiar with the matter. Hong Kong's biggest airline is poised to make a formal announcement as early as Tuesday, though the sources did not elaborate on the agreement between the two sides, including the financial terms. Facing competitive pressures from a trio of rivals including no-frills carriers, jumping into the low-cost travel market could allow Cathay Pacific to attract budget-conscious travellers it does not already serve. Three weeks ago, Cathay Pacific confirmed it was in active discussions to acquire HK Express from debt-ridden Chinese conglomerate HNA Group. The financial concerns of the parent group have spread to Hong Kong Airlines, the full-service sister airline of the low-cost carrier, which was not being considered in the deal, the company said at the time. Both companies have sought to play down progress on the talks since they were officially confirmed on March 5, insisting that discussions were continuing, giving rise to concerns a deal could not be reached. The confirmation of the deal would mean Cathay Pacific is officially jumping into low-cost travel, using an airline vehicle designed for budget travel, without having to cannibalise the luxury, premium offering from its flagship brand, in its first major acquisition since buying Dragonair in 2006, now renamed Cathay Dragon. Assume that both firms have no debt outstanding. Cathay Pacific has estimated that the value of the synergistic benefits from acquiring HK Express is $6,000. Cathay Pacific 3,400 Shares outstanding Price per share HK Express 1,500 $18 $43 Source: Adapted and modified from Lee D., 'Bear market offers chance for mid-caps to issue convertible bonds. 2019 March 25. South China Morning Post. Answer the following questions. (a) Calculate the net present value of the merger if HK Express is willing to be acquired for $20.50 per share in cash. (b) Evaluate the price per share of the merged firm assuming that the conditions in (a). (c) If HK Express agrees to a merger by an exchange of stock, Cathay Pacific will offer one of its shares for every two of HK Express's shares. Advise the price per share of the merged firm. (d) Discuss two reasons supporting and two reasons opposing the above acquisition. No calculation is needed
