Morgan Foods is considering the acquisition of Old Spaghetti Warehouse Inc. in a stock-for-stock exchange. Selected financial data for the two companies is shown below. An immediate synergistic earnings benefit of $1.5 million is expected in this merger, due to cost savings.
Calculate the postmerger EPS if the Old Spaghetti shareholders accept an offer of $54 per share in a stock-for-stock exchange.

Question

Morgan Foods is considering the acquisition of Old Spaghetti Warehouse Inc. in a stock-for-stock exchange. Selected financial data for the two companies is shown below. An immediate synergistic earnings benefit of $1.5 million is expected in this merger, due to cost savings. 
Calculate the postmerger EPS if the Old Spaghetti shareholders accept an offer of $54 per share in a stock-for-stock exchange.

Quizplus · Accepted Answer

Solution:
ER = $54/$36 = 1.5
EPS = ($30 + $8 + $1.5)/[10 + 2(1.5)] = $3.04

Morgan Foods Is Considering the Acquisition of Old Spaghetti Warehouse