Payment Amount and Method of Payment
Referring to our calculation, we find that the acquiring company will pay $857.40 million, i.e. the market value of the target acquisition company. Important to note, the intrinsic value of the company is much higher than the market value, which indicates that the acquiring company is purchasing an undervalued company that will turn profitable for it.
- Kmart Market value - $857.40 millionKmart Book Value - $700 millionKmart Terminal Value of the business (intrinsic value) -$9,536 Billion
In order to pay the target acquisition company, the acquirer can use the following two methods:
i)Cash Offering: This is the most straightforward payment method under which the acquiring company pays the acquired company the ...