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(2023) Question 1.2 Arcane Investments Ltd., a diversified educational service provider, proposed...

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Accounting

(2023) Question 1.2
Arcane Investments Ltd., a diversified educational service provider, proposed an acquisition offer of Tomes Ltd., an academic book retailer. Arcane Investments Ltd. offers an exchange ratio of 0.40 with its share price currently trading at R5.20 and the target company, Tomes Ltd., trading at R1.50. Tomes Ltd.s board recommended that its shareholders only accept an offer with a market premium over 10% as it considers its current share price to be undervalued.
Determine the market premium and discuss the type of takeover Arcane Investments Ltd. is proposing. Argue whether Tomes Ltd. should accept the offer based on your calculations.

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