Question 23

Dr. Lim countered the analyst's argument and said that according to his calculation both firms are correctly priced.Assume that Dr.Lim is correct and suggest another possible motive (other than the synergy value) for the acquisition that is consistent with the data in the question

U The data below is related to the next five questions (question 19-23) US Airlines and American Airways are stock market listed companies in the US. Both firms are in the aviation industry, both operate only in North America, and both have been operating for over 50 years. Their stock market data is: US Airlines American Airways Number of shares 100m 50m Price per share $8 $3 Market capitalization $800m $150m Earnings $100m $75m EPS $1 $1.5 P/E ratio 8 2 US Airlines is considering a bid to buy American Airways. Dr. Lim, an expert in the aviation industry. estimated that the synergy gain for US Airlines will be $15m. U The data below is related to the next five questions (question 19-23) US Airlines and American Airways are stock market listed companies in the US. Both firms are in the aviation industry, both operate only in North America, and both have been operating for over 50 years. Their stock market data is: US Airlines American Airways Number of shares 100m 50m Price per share $8 $3 Market capitalization $800m $150m Earnings $100m $75m EPS $1 $1.5 P/E ratio 8 2 US Airlines is considering a bid to buy American Airways. Dr. Lim, an expert in the aviation industry. estimated that the synergy gain for US Airlines will be $15m