Referring to the merger transaction with BM Autos Ltd. in the case study, answer the following questions: (i) Determine the number of shares of…

(i) No. of Shares to be issued to the shareholders of BM Auto: (10/20) × 12,50,000 = 6,25,000 (ii) Revised P/E ratio of BM Autos Ltd. EPS of BM Auto = 12,50,000/ 12,50,000 = 1 Market Price = EPS × P/E Ratio Revised Market Price of BM Autos Ltd. = 1 × 6.4 = 6.40 Exchange Ratio New Exchange Ratio = 6.40 /20 = 0.32 or i.e 0.32 shares of JayZee Ltd. for one share of BM Autos Ltd. Post-acquisition EPS of JayZee Ltd. Post-acquisition EPS of JayZee Ltd. = (₹ 50,00,000 +12,50,000) / (25,00,000 + 12,50,000*0.32) = 62,50,000/ 29,00,000 = 2.16 (iii) Desired Exchange Ratio Post-acquisition total number of shares = Post-Acquisition Earnings / Pre-Acquisition EPS of JayZee Ltd. = 62,50,000 /2 = 31,25,000 Number of Shares Required to be Issued = 31,25,000 - 25,00,000 = 6,25,000 Thus, exchange ratio should be: Exchange Ratio = 6,25,000 / 12,50,000 = 0.50