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Financials after merger

The Blue Oil Corporation and the Grey Plastics Company have agreed to a merger. The Grey Plastics stockholders will receive .75 shares of Blue for each share of Grey held. Assume that no synergistic benefits are expected.

a. Complete the following table:

Blue Oil Grey Plastics Combined
Sales (in millions) 500 125
Earnings after taxes (millions) 60 13
Common shares outstanding (m) 16 4
Earnings per share 3.75 3.25
Common stock (price per share) 41.25 26
Price-Earnings ratio 10.0

b. Calculate the premium percentage received by Grey stockholders

Assume both that immediate synergistic earnings of $3 million per year will occur as a result of the merger and that the P/E ratio of the combined companies is 10.5

c. Rework part A
d. Rework part B

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The Blue Oil Corporation and the Grey Plastics Company have agreed to a merger. The Grey Plastics stockholders will receive .75 shares of Blue for each share of Grey held. Assume that no synergistic ...

Solution Summary

This discusses and provides the steps to compute the financials after merger

$2.19