The directors of Angelo Ltd have appointed you as a merger and acquisition specialist. They are considering the acquisition of Anborn Ltd. You are to advise them whether to proceed with this project.

The following data is available:

Angelo LtdAnborn LtdMarket price per share R10.00R340 000Earnings per share R3.00R340 000 No of shares issuedR400 000R340 000

Additional information

Cash payment to Angelo Ltd = R12 million

Synergy benefits of R10 million will accrue through the acquisition. Angelo Ltd has just had its assets re-valued and the valuation has appreciated quite significantly.

REQUIRED: Assume the acquisition is based on market values with a cash payment:

3.1. Discuss the possible tax gains from a merger and acquisition (4)

3.2. Calculate the combined value of the proposed acquisition (4)

3.3. Calculate the net present value of the proposal (2)

3.4. Calculate the acquisition premium (2)

3.5. Calculate the post-acquisition market price of the share (2)

3.6. Calculate the post-acquisition increase/decrease price of the share (2)