In 1996, Aetna, a leading player in health insurance, announced its intentions to acquire U.S. Healthcare, the nation's largest health maintenance organization, and provided synergy as a rationale. On the announcement of the merger, Aetna's stock price, which was \($57,\) dropped to \($52.50,\) while U.S. Healthcare's stock price surged from \($31\) to \($37.50.\) Aetna had 400 million shares, and U.S. Healthcare had 50 million shares outstanding at the time of the announcement.

a. Estimate the value, if any, that financial markets are attaching to synergy in this merger.

b. How would you reconcile the market reaction to the rationale presented by management for the acquisition?