Hunny Ltd. is considering merger with Bunny Ltd. Hunny Ltd. has 3,40,000 shares with current market price at ₹ 20 per share and its Profit After Taxes (PAT) amounts to ₹ 17,00,000. Bunny Ltd. has 80,000 shares with curre

CS Professional · Corporate Restructuring, Insolvency, Liquidation & Winding-up · PYQS · June 2023
Hunny Ltd. is considering merger with Bunny Ltd. Hunny Ltd. has 3,40,000 shares with current market price at ₹ 20 per share and its Profit After Taxes (PAT) amounts to ₹ 17,00,000. Bunny Ltd. has 80,000 shares with current market price of ₹ 15 per share and its PAT is ₹ 6,00,000. If the merger goes through by exchange of equity shares and the exchange ratio is based on the current market price, what would be the new earning per share of Hunny Ltd. ?

Answer & Explanation:

(i) Calculation of New EPS of Hunny Ltd Number of Equity shares to be issued to shareholders of Bunny Ltd: (80,000 x 15/20) = 60,000 shares Total Number of Shares in Hunny Ltd. after merger (3,40,000 + 60,000) = 4,00,000 shares Total PAT post-merger (₹ 17,00,000 + ₹ 6,00,000) ₹ 23,00,000 EPS post-merger (₹ 23,00,000/4,00,000 shares) ₹ 5.75 Per Share

Topics: Merger Valuation

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