Problem 26-13 Merger NPV [LO3]
Harrods PLC has a market value of £134 million and 4 million shares outstanding. Selfridge Department Store has a market value of £36 million and 2 million shares outstanding. Harrods is contemplating acquiring Selfridge. Harrods's CFO concludes that the combined firm with synergy will be worth £185 million, and Selfridge can be acquired at a premium of £10 million.
If Harrods offers 1.2 million shares of its stock in exchange for the 2 million shares of Selfridge, what will the stock price of Harrods’s be after the acquisition?
Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
What exchange ratio between the two stocks would make the value of a stock offer equivalent to a cash offer £46 million?
Note: Do not round intermediate calculations and round your answer to 4 decimal places, e.g., 32.1616.