Question
LeftShoe Corp. has 10 million shares outstanding, each trading at $20 per share. RightShoe Corp. has 5 million shares outstanding, each trading at $40 per
LeftShoe Corp. has 10 million shares outstanding, each trading at $20 per share. RightShoe Corp. has 5 million shares outstanding, each trading at $40 per share. LeftShoe wants to acquire RightShoe. The acquisition will result in net synergies of $100 million. Assume that the pre-merger share prices reflect standalone values (that is, investors didnt anticipate acquisition). Suppose LeftShoe announces a cash offer to acquire RightShoe by paying a 30% premium to RightShoes pre-merger price. What is the NPV of the trans- action to LeftShoe and what is the NPV of the transaction to RightShoe? What are the two share prices immediately after the announcement?
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Accounting Volume 2
Authors: James Reeve, Jonathan Duchac, Sheila Elworthy, Carl S. Warren
2nd Canadian edition
176501452, 978-0176501457, 978-0176509743
