What is the maximum percentage premium that Los Pollos Inc. could pay in a cash transaction without losing money on the acquisition? If, instead, the acquisition took place via a stock-swap transaction, what is the highest exchange ratio Los Pollos could offer?
Los Pollos Inc.’s shares trade at $30, and the company has 100 million shares outstanding. Hermanos Ltd.’s shares trade at $20, and the firm has 30 million shares outstanding. The two companies are fully equity financed. The free cash-flows for Los Pollos Inc. are expected to be $300 million next year, while Hermanos Ltd. predicts […]