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The following information relates to two public companies, Bat Inc and Ball Inc.
The shareholders of Ball Inc have accepted a takeover bid offer from Bat, and the purchase consideration will be in the form of shares in Bat. The agreed offer is 3 shares in Bat for every 2 shares in Ball. The directors of Bat expect some synergy from the acquisition. Corporation tax is 30%. By how much must operating profit increase as a result of the acquisition to avoid earnings dilution for Bat shareholders? Operating profit must increase by $________ per annum. |