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Corp Fin. Takeover Premium

Q1

(33*15+50*35)/(12+35) = 47.77/share in the combined company

premium = 47.77*12 - 33*15 = 78.2

Q2

(33*15+50*35+105)/(12+35) = 50/share in the combined company

premium = 50*35 - 50*35 = 0

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I am 100% sure that one of you saying that you’re 100% sure is wrong…

I chose 78 and 27. I’m pretty sure you need to calculate it using the pre merger market values, calc. as (stock price * no. of shares). It was straight from the curriculum…can’t go wrong with that.

I agree with ymc, except I did Q2 a lil different, but same answers

I also agree with ymc.

the point is that the first question assumed NO synergies while the second DID assume synergies. so you definitely cannot do the 100-27=78 or the 105-0 = 105 to answer both questions.

two different scenarios…at least two questions i am confident about…

cheers

i think the issue is that they were 2 seperate scenarios….
i got 78 and 0

The answer to the second question was 100% zero.

well let’s go to the question referring to the reasoning behind the stock use instead of cash? i put because the stock was overvalued, anyone?????????????????????????????????????????

richsg21.. i agree

me 2

McPass, CFA

If the synergy is zero (Q1), the acquirer’s gain is -78 if you think about it. If the synergy is >0, the acquirer has to share it with the target by S - (Pt - Vt). Only in this case though, Pt is actually Pat (the merged share price).

When calculating the merged stock price, you don’t add synergy.

lxwqh Wrote:
——————————————————-
> is there an answer like this:
>
> Acquirer’s stock is overvalued compared to the
> target?

Yes I put the same answer for this along with 105 and 0