ETI, the parent company of EBG bought 61.1% of TTBG in 2011 from SSNIT and the rest of TTBG shares from other shareholders and then merged the operations of EBG and TTBG. ETI valued TTBG at GHS 220.85 million, or GHS 12.62 per share. Early in 2011, before the acquisition, TTBG made a rights issues of shares to existing shareholders, including SSNIT with exercise price set at GHS 8.32 per share. All rights were exercised and TTBG raised GHS 66.6 million in new equity financing. Soon after the transaction, the Ghana Stock Exchange reported that EBG has added 63,100,000 ordinary shares to their issued shares. This was as a result of the issuance and allotment of same to Ecobank Transnational Incorporated under the merger [of EBG and TTBG] arrangement." This brought the total issued shares of EBG to 293,230,000, the GSE added. In the 4th quarter of 2011, EBG traded at an average price of GHS 3.40 per share. ETI reasoned that merging EBG's operations with TTBG will result in efficiency revenues of GHS 5 million a year in perpetuity. The opportunity cost of equity for the combined firm is estimated at 30% p.a. Answer the following: i. How many shares of TTBG did ETI buy? ii. How much did ETI pay SSNIT? All things equal, what value was ETI credited with by EBG for the ETI's holdings in TTBG? E.K. Agbloyor, L. Mensah, L. Amoah & A.Q.Q. Aboa gye Page 10 12 iii. iv. V. How many new TTBG shares were issued because of the rights issue they undertook in early 2011? Why do you think TTBG (or other firms) will undertake a rights issue? Approximately, how much was the cost of this acquisition to ETI shareholders if the consensus value of TTBG before the ETI offer was GH 215 million? What was the NPV of the merger to shareholders of EBG? What was the NPV of the transaction to shareholders of TTBG? vi. vii. ETI, the parent company of EBG bought 61.1% of TTBG in 2011 from SSNIT and the rest of TTBG shares from other shareholders and then merged the operations of EBG and TTBG. ETI valued TTBG at GHS 220.85 million, or GHS 12.62 per share. Early in 2011, before the acquisition, TTBG made a rights issues of shares to existing shareholders, including SSNIT with exercise price set at GHS 8.32 per share. All rights were exercised and TTBG raised GHS 66.6 million in new equity financing. Soon after the transaction, the Ghana Stock Exchange reported that EBG has added 63,100,000 ordinary shares to their issued shares. This was as a result of the issuance and allotment of same to Ecobank Transnational Incorporated under the merger [of EBG and TTBG] arrangement." This brought the total issued shares of EBG to 293,230,000, the GSE added. In the 4th quarter of 2011, EBG traded at an average price of GHS 3.40 per share. ETI reasoned that merging EBG's operations with TTBG will result in efficiency revenues of GHS 5 million a year in perpetuity. The opportunity cost of equity for the combined firm is estimated at 30% p.a. Answer the following: i. How many shares of TTBG did ETI buy? ii. How much did ETI pay SSNIT? All things equal, what value was ETI credited with by EBG for the ETI's holdings in TTBG? E.K. Agbloyor, L. Mensah, L. Amoah & A.Q.Q. Aboa gye Page 10 12 iii. iv. V. How many new TTBG shares were issued because of the rights issue they undertook in early 2011? Why do you think TTBG (or other firms) will undertake a rights issue? Approximately, how much was the cost of this acquisition to ETI shareholders if the consensus value of TTBG before the ETI offer was GH 215 million? What was the NPV of the merger to shareholders of EBG? What was the NPV of the transaction to shareholders of TTBG? vi. vii