Question
ABC has 1.00 million shares outstanding, each of which has a price of $17. It has made a takeover offer of XYZ Corporation, which has
ABC has 1.00 million shares outstanding, each of which has a price of $17. It has made a takeover offer of XYZ Corporation, which has 1.00 million shares outstanding, and a price per share of $2.37. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms.
Assume ABC makes a stock offer with an exchange ratio of 0.13. What are the prices of ABC and XYZ? What premium over the current market price does this offer represent?
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Financial Management
Authors: Rob Quail, Ricardo J. Rodriguez
2nd Edition
1557868441, 9781557868442
