Question
In the fall of2009, Kraft Foods attempted to buy Cadbury plc. Data for each of the two companies are given in the table. Both companies
In the fall of2009, Kraft Foods attempted to buy Cadbury plc. Data for each of the two companies are given in the table. Both companies are all equity financed. The CEO of Kraft Foods estimated that merger synergies had a present value of $10 billion. Assume that Kraft wanted to make an all share offer for Cadbury. What exchange ratio would Kraft have to offer in order for the npv of the offer to be zero to Cadbury shareholders?
Kraft Cadbury
Value of Firm
$51B $16B
Shares Outstanding
1.71B 0.97B
Stock Price
$29.82 $16.49
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
