Skip to content

ACCA Strategic Professional · Advanced Financial Management · Regulatory framework and processes

Target Delta has a pre-bid share price of $2.50 and 40 million shares. Bidder Omega offers $3.30 per share in cash. Omega estimates that synergies have a present value of $50 million. What is the net gain to Omega's shareholders, ignoring bid costs?

Omega's shareholders gain $18 million. The premium paid to Delta's shareholders is $0.80 per share on 40 million shares, or $32 million, and this is deducted from the $50 million present value of synergies to give the bidder's net gain.

  1. A$18 millionCorrect
  2. B$32 million
  3. C$50 million
  4. D$82 million

Explanation

Premium paid = ($3.30 - $2.50) x 40m = $32m. Net gain to bidder = synergies $50m - premium $32m = $18m. The $32m figure is the premium itself, which goes to Delta's shareholders; $82m wrongly adds the premium to the synergies.

Did you get it right without looking?

One question tells you little. A timed set on Regulatory framework and processes shows your real accuracy, how long you take and where you lose marks.

Practise Regulatory framework and processesFree diagnostic mock

More Regulatory framework and processes questions