Answer:
12.5m
Step-by-step explanation:
Number of New Shares = (Transaction Offer Price - % Debt Financed * Transaction Offer Price) / Buyer's Stock Price
Given the provided values:
Buyer's stock price (GBP) = £12.0
Transaction offer price (GBP) = £10.0
Target company shares outstanding in million (no options) = 25.0
% Debt financed = 40.0%
% Stock financed = 60.0%
Let's calculate the number of new shares:
Number of New Shares = (£10.0 - 40% * £10.0) / £12.0
Number of New Shares = (£10.0 - £4.0) / £12.0
Number of New Shares = £6.0 / £12.0
Number of New Shares = 0.5
Since the target company has 25.0 million shares outstanding, the number of new shares to be issued by the buyer to purchase the target would be:
Number of New Shares = 0.5 * 25.0 million
Number of New Shares = 12.5 million