Question
Sea Views Ltd owns a chain of luxury hotels and resorts. Sea Views Ltd has earnings per share (EPS) of $2. It has 10 million
Sea Views Ltd owns a chain of luxury hotels and resorts. Sea Views Ltd has earnings per share (EPS) of $2. It has 10 million shares outstanding and its stock is trading at $20 per share. Sea Views Ltd would like to merge with Orchards Ltd, a firm that produce non-alcoholic beverages and ready-made health food meals. Orchards Ltd has earnings per share of $1.25 and 4 million shares outstanding. Orchards' stock is trading at $15 per share.Sea Views Ltd will pay for Orchards Ltd by issuing new shares. There are no expected synergies from the transaction.
- What type of merger is it? Provide two possible reasons why Sea Views Ltd would like to merge with Orchards Ltd?
- If Sea Views Ltd pays no premium for Orchards Ltd, what is Sea Views 's earnings per share after the merger?
- If Sea Views Ltd offers a 20% premium to buy Orchards Ltd, what is Sea Views 's earnings per share after the merger?
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Fundamentals Of Management
Authors: Ricky Griffin
10th Edition
9780357517345
