Consider the following pre-merger information concerning two firms, Mokhaba Manufacturers and
Mabhida Merchants:
Data Mokhaba Mabhida
Shares issued 1 600 1 000
Price per share R35 R25
Mokhaba wishes to acquire Mabhida and believes that there will be synergistic benefits of R6 000.
Note: Both firms have no debt.
1. If Mabhida is willing to be acquired at R30 per share, what is the NPV of the merger?
2. Calculate the PPS of the merged company.
3. Calculate the merger premium