Question
YZ Ltd has a market value of $600 million and 44 million shares outstanding. MF Ltd has a market value of $200 million and 16
YZ Ltd has a market value of $600 million and 44 million shares outstanding. MF Ltd has a market value of $200 million and 16 million shares outstanding. YZ is contemplating to acquire MF Ltd. CFO of YZ concludes that the combined firm values will be $900 million and MF Ltd can be acquired for $252 million.
(a)If YZ offers 16 million shares of its stock for in exchange for the 16 million shares of MF, what will the share price of YZ be after the acquisition?
(b)What exchange ratio between the two companies would make the value of stock offer equivalent to a cash offer of $252 million.
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
16th edition
125927716X, 978-1259687969, 1259687961, 978-1259277160
