Question 8

ABC Corp is trying to Acquire XYZ Corp through a stock swap offer. ABC currently has 100 million shares outstanding, a share price of $25, and outstanding debt of $1,500 million. XYZ currently has 50 million shares outstanding, a share price of $60, and outstanding debt of $300 million. Neither company has any excess cash. The synergies associated with the acquisition are $500 million. How should ABC Corp structure the offer in order for its shareholders to capture the full value of the synergies? Select the best answer. (Hint: you may use Excel's Goal Seek Function to help you with this - although that is not necessary)

	I.	ABC should offer 3 new shares of ABC for every share of XYZ.
	II.	ABC should offer 2.8 new shares of ABC for every share of XYZ.
	III.	ABC should offer 2.4 new shares of ABC for every share of XYZ.
	IV.	ABC should offer 2 new shares of ABC for every share of XYZ.