Pl. help me on Mergers and acquisition Of MAFA

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CA supriyo saha (Querist)
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06 March 2008 Suppose EPS of A and B are Rs 2 and Rs 3 respectively. A wants to acquire B. Swap ratio-.5:1(1 sh of A for every 2 sh of B)
So wht. will be the equivalent EPS of B after merger. sh.cap. of A and B is 20000 and 30000 respectively.

I have solved in the foll. way.

shareholder of B earns rs3 for 1 share
so they will be earning Rs 6 for 2 shares.

therefore their equivalent EPS will be 6 in the post-merger .

One book has solved this in the foll. way.
Earings of A-40000 and B-90000
shares issued by A-15000.
total no. of shares of merged entity-35000
EPS of merged entity-130000/35000=3.7143
So equivalent EPS of B-3.7143X.5=1.8572
Now pl. tell me which approach is correct.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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06 March 2008 After merger there will be only one company, so where is the question of two EPS?

CA Saurabh Maheshwari

CA Saurabh Maheshwari (Expert)
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07 March 2008 THE SOLUTION OF BOOK IS CORRECT

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Pl. help me on Mergers and acquisition Of MAFA

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