Morgan Stanley Deck
Quick drill: Acquirer has $100M net income, 100M shares at $20 (EPS $1.00, P/E 20x). It buys a target with $50M net income for $750M in an all-stock deal. Accretive or dilutive, and by how much?
Model answer
Accretive by about 9%. New shares issued = $750M / $20 = 37.5M, so pro forma shares = 137.5M. Pro forma net income = $100M + $50M = $150M, giving EPS of $150M / 137.5M = $1.09 versus $1.00…
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