Kentish Spa has a market value of 10 million and 1 million shares outstanding.

Due to the crisis it has been forced to merge with a similar size

rival, Tufnell Spa, which trades at 6 per share having 2 million shares.

a. If the estimated synergies amount to 2 million, what would be an

all-share (i.e. no cash component) offer that Tufnell's shareholders

wouldn't be able to reject?

(5 marks)

b. Tufnell Spa has recently suffered heavily and has accumulated losses

of 2 million which can provide a tax benefit for Kentish of 500,000.

Can Tufnell's shareholders receive an improved offer even though

Tufnell is a lossmaking company? Explain.

(5 marks)

c. Tufnell's shareholders demand a 2 cash component, what is Kentish's

offer now?

(5 marks)

d. Should you expect to see an uptick of M&A activity once the economy

comes back to normal following the crisis? Explain [writing no more

than 10 lines].