Question:
What is the ratio of exchange in a stick swap acquisition if JHC pays $20 per share for Mobile? Please help to solve.
What effect will this stick swap have on the EPS of the original shareholders of each company? Please help to solve.
Homework Answers
(I) calculation of swap
market price per share of JHC = $ 43.30
market price per share of mobile = $ 20
exchange swap on the basis of market price = $ 20 / $ 43.30
= 0.462
it means 0.462 shares for 1 held
(II) calculation of effect of EPS
number of shares issue to moblie coffee = 3400000 * 0.462 =1570800
Total number of shares after merger = 7000000 + 1570800 = 8570800
total eanings after merger = 29000000 + 8800000 = $ 37800000
EPS after merger = total earning / total number of shares = $ 37800000 /8570800 = $ 4.410
Effect on EPS
| JHC CO. | |
| After merger EPS | $ 4.410 |
| less- before merger eps ( 29000000 /7000000) | $ 4.143 |
| increase | 0.267 |
| Mobile coffee | |
| After merger EPS ( $ 4.410 * 0.462) | $ 2.0374 |
| less- before merger eps ( 8800000 /3400000) | $ 2.588 |
| decrease | $ 0.5508 |
here mobile coffee's EPS decrese by $ 0.5508 andd JHC's share increase by $ 0.267 . therefore JHC go ahead.
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What is the ratio of exchange in a stick swap acquisition if JHC
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