Company A has no debt and 12 million shares outstanding trading for $6,50 each. Company A intends to acquire Company B, which has $15 million debt and 6 million shares outstanding trading for $11,50 each, issuing Company A new shares. Company B is facing financial problems and didn't have profits for several years, so there is no possibility of using the tax benefit relative do its debt. If Company A goes on with the acquisition, it will be possible to use the tax shield that is not being used. Company B shareholders will only accept the bid if their return is, at least, 5% (increase in Company B shareholders wealth).