Question
Help needed ) Harry's Department Store, Inc. has a market value of $600 million and has 30 million shares outstanding. Kay Discount Outlet has a
Help needed
) Harry's Department Store, Inc. has a market value of $600 million and has 30 million shares outstanding. Kay Discount Outlet has a market value of $200 million and 20 million shares outstanding. Harry's is thinking about acquiring Kay. Harry's CFO concludes that the combined firm with synergy will be worth $1 billion, and Kay can be acquired at a premium of $100 million.
a)If Harry's offers 15 million shares of its stock in exchange for the 20 million shares of Kay, what will the stock price of Harry's be after the acquisition?
b)What exchange ratio between the two stocks would make the value of stock offer equivalent to a cash offer of $300 million?
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