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Albertsons Inc., is looking to buy Pams Club Inc. in an all-stock deal. Synergies from the merger are expected to result in additional) net income
Albertsons Inc., is looking to buy Pams Club Inc. in an all-stock deal. Synergies from the merger are expected to result in additional) net income of $5,000 for the combined firm. The table below shows related financials of the two firms: Shares Forward EPS Pre-announcement Stock Price L | | Albertsons Pam's Club 10,000 5,000 2.5 4.0 $20 $10 What is the maximum price/share that Albertson's should offer for Pam's Club in order to prevent the deal from being dilutive? [Hint: We did a somewhat similar problem in class with no synergies] A. $4/share B. $8/share C. $12/share D. $16/share E. $20/share
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