Based on the following information find out the total amount of purchase consideration and the post-Merger Capital Structure of the Company. Capital structure of Transferor and Transferee Companies are as follows: A Ltd.

CS Professional · Corporate Restructuring, Insolvency, Liquidation & Winding-up · PYQS · December 2023
Based on the following information find out the total amount of purchase consideration and the post-Merger Capital Structure of the Company. Capital structure of Transferor and Transferee Companies are as follows: A Ltd. (Transferor Company) B Ltd. (Transferee Company) 1,00,00,000 Equity Shares of ₹ 10 each 10,00,00,000 15,00,000 Equity Shares of ₹ 100 each 15,00,00,000 5,00,000 10% Preference Shares of ₹ 100 each 5,00,00,000 10,00,000 12% Preference Shares of ₹ 100 each 10,00,00,000 1,00,000 11% Redeemable Debentures of ₹ 1,000 each 10,00,00,000 The swap ratio is fixed as follows: (a) For every 40 Equity Shares in A Ltd. 5 Shares of B Ltd. (b) For every 5 Preference Shares in A Ltd. 4 Shares of B Ltd. (c) Debentureholders will be allotted with 12% Redeemable Debentures of ₹ 1,000 each for every one Debenture held in A Ltd. (with no change in tenure)

Answer & Explanation:

Answer 2 (a) Transferor Company - Existing Shareholding Type of Shares/Debentures No. of Shares Face Value Total Value (INR) Equity 1,00,00,000 10 10,00,00,000 10% Preference 5,00,000 100 5,00,00,000 11% Debentures 1,00,000 1000 10,00,00,000 Total 25,00,00,000 Transferee Existing Shareholding Equity 15,00,000 100 15,00,00,000 12% Preference 10,00,000 100 10,00,00,000 Total 25,00,00,000 Purchase Consideration Shares allotted to Shareholders of Transferor Company Shares Existing holding New Shares to be allotted Face value (INR) Purchase Consideration (INR) Equity (Swap ratio) 40 5 Total Shares 2,50,000 12,50,000 100 12,50,00,000 (10000000/40) (250000*5) Preference swap ratio) 5 4 Total Shares 1,00,000 4,00,000 100 4,00,00,000 (500000/5) (100000*4) Total Purchase Consideration 16,50,00,000 Post-Merger Capital Structure Type of Shares/Debentures No. of Shares Face Value (INR) Total Value (INR) Equity 27,50,000 100 27,50,00,000 12% Preference 14,00,000 100 14,00,00,000 11% Redeemable Debentures 1,00,000 1000 10,00,00,000 Note: Debentures being debt does not form part of purchase consideration.

Topics: Corporate Restructuring

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