Pl. help me on Mergers and acquisition Of MAFA
This query is : Resolved
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.
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.
06 March 2008
After merger there will be only one company, so where is the question of two EPS?
07 March 2008
THE SOLUTION OF BOOK IS CORRECT
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