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Lexis Limited, a software development company is contemplating the acquisition of Nexis Limited by means of a share issue. The combination of the two firms'

Lexis Limited, a software development company is contemplating the acquisition of Nexis Limited by means of a share issue. The combination of the two firms' operations will result in economies of scale and the additional value generated is estimated to be R72 000 000. It was agreed that the purchase consideration for the Nexis Limited acquisition should be based on an exchange of 1.2 shares of Lexis Limited for each share of Nexis Limited.

Key acquisition data is detailed below:

Company Company No. of shares Price per share Earnings after Tax
Lexis Limited 18,000,000 R32 R26 000 000
Nexis Limited 13 200 000 R28 R19 000 000

2.7 Calculate the net present value of the proposed acquisition. (4 marks)

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