- Synergies from the acquisition = 600 = S
- Stock exchange ratio
- Acquirer 0.75 share : Target company 1 share (*1)
- No cash is changing hands for the merger.
| Pre-merger | Acquirer | Acquirer's new issue for the merger | Target company | |
| Stock price | $ 60 | $ 60 | $ 39 | |
| Shares outstanding | 150 | 60 (*1) | 80 | |
| Market value | $ 9,000 = VA | $ 3,600 | $ 3,120 = VT | |
Post merger value of the combined firm:
VAT = VA + VT + S - C = 9,000 + 3,120 + 600 - 0 = $ 12,720
Price per share of the combined firm
PAT = VAT / (SA + SA, new share) = $ 12,720 / (150 + 60) = $ 60.57
Actual price paid for the Target company
N * PAT = 60 * $ 60.57 = $ 3,634.2
Target company's gain as the target
GainT =(N * PAT) - VT = $ 3,634.2 - $ 3,120 = 514.2 (takeover premium in the transaction)
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