Company X is considering acquiring company Y. You are provided with the information below. X Y EPS £4.00 £1.00 Dividend/share £2.50 £0.9 Number of shares 1 million 0.6 million Share price £80 £24 Additionally, you estimate that investors currently expect a steady growth of about 6% in company Y’s earnings and dividends. After the acquisition, this growth rate would increase to 7.75% per year, without any additional capital investment required.

a. Calculate the synergies from the acquisition?

b. What is the premium paid to company Y’s shareholders from the acquisition if company X pays £30 in cash for each share of company X?

c. What would instead be the premium to company Y’s shareholders from the acquisition if company X offers $12 cash plus one share of company X for every five shares of company Y?