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average takeover premium is applied to the estimate to determine the acquisition price ofNorthwest Airlines. Table – 1.8Target CompanyPre-merger Stock PriceTakeover PriceTakeover PremiumComair$17.94 $23.85 32.94%14 | P a g eNorthwest VariablesTargetcompanyComparableCompanyMeanmultiplesEstimated Value EPS-20.03P/E-2.1342.74Cash flow per share-1.42P/CF0.58-0.82Book Value per share5.41P/BV1.025.54Revenue per share7.67P/S0.090.71EV/Revenue(2008)0.634024.17Estimated Stock Value12.04
ASA Holdings$31.94 $24.69 -22.70%Iberia$2.57 $2.02 -21.40%KLM$11.96 $16.38 36.96%Mean Premium6.45%MeanTarget's estimated Stock Value12.04Estimated takeover premium6.45%Estimated takeover Price of Target12.82Table – 1.93.Comparable Transaction Analysis: In this analysis we collect a relevant sample of recent takeover transactions in order to look atsame relative value measures thereby comparing the target’s multiples against the multiples paidin similar transactions. The comparable companies are those that are in the similar time periodhaving similar size, structure and scope. The comparable companies used in the valuation areTrans World Airlines, America West and Comair. The table below gives us the valuation variablesused for this analysis as given in the case. –15 | P a g eValuation VariablesTWAAmerica WestComairAcquisition share price$38.62 $7.09 $29.07 EPS($5.57)$1.66 $0.34 Cash Flow per share($0.05)$4.37 $1.69 Book Value Per share($2.85)$45.95 $7.41 Sales per share$55.16 $66.59 $7.53
Table – 2.1The table below details the value of the equity multiples that are computed for each of thecomparable company and the mean relative valuation ratios are applied to thecorresponding data for Northwest to estimate the comparable stock price. In sum, eachvaluation multiple was multiplied by the corresponding variable of Northwest Airlines toproduce an estimated takeover value based on each comparable. The cash flow per sharevariable was over-weighted and a weighted average calculated to determine an overalltake over value estimate of $11.91 per share. Becausecomparable transactions approachis based on the acquisition price, the takeover premium of 6.45% is implicitly recognizedin this approach.Table – 2.2Target Company(Northwest) VariablesTarget companyComparable CompanyMean multiplesMeanEPS-20.03P/E27.6-553.08Cash flow per share-1.42P/CF-251.2356.69Book Value per share5.41P/BV-3.2-17.08Sales per share7.67P/S1.611.93Estimated Stock Value(includes takeover premium)$11.91Table – 2.316 | P a g e