Koala Technologies is considering the acquisition of Laser Industries in a stock-for-stock exchange. Selected financial data for the two companies is shown below. An immediate synergistic earnings benefit of $2.5 million is expected in this merger.
Calculate the postmerger EPS if the Laser shareholders accept an offer of $33.25 a share in a stock-for-stock exchange.

Question

Koala Technologies is considering the acquisition of Laser Industries in a stock-for-stock exchange. Selected financial data for the two companies is shown below. An immediate synergistic earnings benefit of $2.5 million is expected in this merger. 
Calculate the postmerger EPS if the Laser shareholders accept an offer of $33.25 a share in a stock-for-stock exchange.

Quizplus · Accepted Answer

Solution:
ER = $33.25/$35 = 0.95
EPS = ($9.4 + $1.2 + $2.5) / [4 + 0.8(0.95)] = $2.75

Koala Technologies Is Considering the Acquisition of Laser Industries in a Stock-For-Stock