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Consider the following data in relation to a proposed acquisition, where Firm B will take...

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Accounting

Consider the following data in relation to a proposed acquisition, where Firm B will take over Firm A in a horizontal takeover.

Consider the following data in relation to a proposed acquisition, where Firm B will take over Firm A in a horizontal takeover.

Pre-merger Value A

$550m

Pre-merger Value B

$420m

Post-merger Value A + B

$1,150m

Cash Offer

$580m

Share Offer

52% of Shares in A + B

a. Estimate the gains available from the merger. (4 marks)

b. Estimate the value of the merger to firm As shareholders under both the cash and share offer. (6 marks)

c. Estimate the value of the merger to firm Bs shareholders under both the cash and share offer. (6 marks)

d. Which offer will predominate, cash or shares, if the shareholders of A are given the choice? (4 marks)

a. Estimate the gains available from the merger.

b. Estimate the value of the merger to firm As shareholders under both the cash and share offer.

c. Estimate the value of the merger to firm Bs shareholders under both the cash and share offer.

d. Which offer will predominate, cash or shares, if the shareholders of A are given the choice?

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