Calculate the post-merger EPS based on exchange ratio of 0.4:1 being offered by A Ltd. Indicate the immediate EPS accretion or dilution, if any, that will occur for each group of shareholders.
CS Professional · Capital Commodity and Money Market · PYQS · December 2015
Calculate the post-merger EPS based on exchange ratio of 0.4:1 being offered by A Ltd. Indicate the immediate EPS accretion or dilution, if any, that will occur for each group of shareholders.
Answer & Explanation:
Post-Merger EPS Particulars A Ltd. B Ltd. Combined EAT (₹) 2,10,000 99,000 3,09,000 Shares outstanding 1,00,000 80,000 1,32,000* EPS (₹) 2.10 1.24 2.34 EPS accretion or (dilution) (₹) 0.24 (0.30**) ----- Working Notes: Share Outstanding (Combined) = 1,00,000 shares + (0.40 × 80,000) = 1,32,000 shares EPS claim per old share = ₹2.34 × 0.4 = ₹0.936 EPS dilution = (₹1.24 - ₹0.936) = ₹0.304
Topics: Mergers and Acquisitions
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