Question1

a. This will lead to a lower Rd, but acquisitions do not lead to creation of
shareholder value (unless there are significant synergies involved).
Hence this wont necessarily be a good thing

b This will lead to a lower EPS, but acquisitions do not lead to creation of
shareholder value (unless there are significant synergies involved).
Hence this wont necessarily be a bad thing

c The offer stands on the premise that only we know the stock is
overvalued. If even Digital organics knows that, then they will ask for a
higher EV/EBITDA miltiple

Question 2

Steinberg Dietrich
EPS 6.00 8.8
Div/Share 3.73 5.28
No of Shares 10.00 5.5
Stock Price 60.00 85

a We calculate Re based on Div, growth rate of g = 2.5 and Share Price

Re Steinberg = 0.09

Re Dietrich 0.09

Combined Div 66.34 Mil $

Using g = 2.5 and re = 8.8 and one time 15 % growth

Total value 1,227.20

Initial value 1,067.50 Mil $

Gain 159.70 Mil $

b Value of Dietrich 467.50

Hence Premium = 600 - 467.5 132.50 Mil $

c Since mergers do not create any value the total value will be 1,227.20
 Dietrich gets 1.65*5.5 shares 9.08 mShares

Steinberg has issued 9.08 shares. Hence total outstanding shares 19.08

Hence value of the company held by Dietrich = 9.08/19.08 * value 583.85

Hence premium paid (583.85 - 476.5 Value of dietrich) 116.35

Question 3

a
Nedwin Feldmania
EPS 2.00 2.50
Price per share 40.00 25.00
Price earnings ratio 20.00 10.00
No of shares 100,000.00 200,000.00
Total Earnings 200,000.00 500,000.00
Market Value 4,000,000.00 5,000,000.00

b New shares 162,172.28

hence Nedwin shares per feldmania shares 0.81

c Feldmania total share percentage 0.62

Total calue held by Feldmania 5,567,142.86
Hence premium paid(cost) 567,142.86

d Nedwin Value = total value - Feldmania value 3,432,857.14

$
$
Mil $
$
Merged
2.67
34.33
12.86
262,172.28
700,000.00
9,000,000.00