what will be the value of share after merger if A wants to merge B where A will pay market value of share to B shareholders. A has 2300 shares outstanding at $20. B has 1800 shares at $15. value per share of merged firm
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Exchange Ratio example
Assume Firm A is the acquirer and Firm B is the target firm. Firm B has 10,000 outstanding shares and is trading at a current price of $17.30 and Firm A is willing to pay a 25% takeover premium. This means the Offer Price for Firm B is $21.63. Firm A is currently trading at $11.75 per share.
To calculate the exchange ratio, we take the offer price of $21.63 and divide it by Firm A’s share price of $11.75.
The result is 1.84. This means Firm A has to issue 1.84 of its own shares for every 1 share of the Target it plans to acquire
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