Atlas Outdoor, a listed maker of tents and backpacks, wants to buy TrailPeak, a fast-growing hiking-footwear brand. The board's first question: does the deal add to or dilute our earnings per share, and what would it take to make it worthwhile?
- Atlas net income / shares
- $400M / 200M
- Atlas share price
- $40.00 (P/E 20.0x)
- TrailPeak share price / shares
- $25.00 / 40M
- TrailPeak net income / EBITDA
- $70M / $140M
- TrailPeak net debt
- $150M
- TrailPeak book equity
- $600M
- Offer premium
- 30%
- Funding
- 50% new Atlas stock, 50% new debt at 7.0%
- Intangible write-ups
- $200M, amortized over 10 years
- Tax rate
- 25%
Your assignment
Build the deal: price, funding, purchase accounting, then pro forma EPS. Tell the board whether it's accretive, and how much in synergies would make it 5% accretive.