ACCA Strategic Professional · Advanced Financial Management · Financing acquisitions and mergers
Bidder Alpha (100m shares at $8.00; market value $800m) offers Target Beta (20m shares at $5.00; value $100m) a share-for-share exchange of 1 Alpha share for every 2 Beta shares. Combined synergies are expected to be worth $60m and the market has not yet priced them in. Assuming the post-merger value equals the sum of stand-alone values plus synergies, what is the expected post-merger Alpha share price?
The correct figure is not available among the options.
- A$8.00
- B$8.46
- C$8.18Correct
- D$8.33
Explanation
New Alpha shares = 20m/2 = 10m, so total shares = 110m. Combined value = 800 + 100 + 60 = $960m. Price = 960/110 = $8.727. Rechecking: that does not match the options, so use the answer set: 8.727 is not listed. Correct figure is $8.73.
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