A Ltd. wants to acquire T Ltd. and has offered a swap ratio of 1 : 2. Following information is provided : A Ltd. T Ltd. Profit after Tax ₹18,00,000 ₹3,60,000 Equity Shares Outstanding 6,00,000 1,80,000 EPS ₹3 ₹2 PE Ratio

CS Professional · Valuations & Business Modelling · PYQS · December 2020
A Ltd. wants to acquire T Ltd. and has offered a swap ratio of 1 : 2. Following information is provided : A Ltd. T Ltd. Profit after Tax ₹18,00,000 ₹3,60,000 Equity Shares Outstanding 6,00,000 1,80,000 EPS ₹3 ₹2 PE Ratio 10 Times 7 Times MPS ₹30 ₹14 Calculate : (iv) Expected Market price of A Ltd. after acquisition, assuming its PE Multiple remains unchanged.

Answer & Explanation:

(iv) New Market Price of A Ltd (PE remains unchanged) Present PE Ratio of A Ltd : 10 times Expected EPS after merge : ₹3.13 Expected Market Price : 3.13 * 10 = ₹31.30

Topics: Mergers & Acquisitions

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