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Homework #7 Merger with Stocks 200 shares x $10 per share = $2,000 50 shares x $8 per share = $400 [Pre-Merger] Firm A Firm B Firm A is making a cash-and-stock offer to acquire firm B. Firm A intends to offer $12 for each of firm B's shares. The $12-offer consists of 0.8 of firm A's shares and $2 cash. 1. (20 pts) If the offer is an accurate assessment of the valuations of the two companies in a merger, what is the synergy of the merger? 2. (20 pts) What are the portions of the synergy that go to firm A and firm B, respectively? 3. (20 pts) What is the equity of the combined company? 4. (40 Pts) After the merger, how many shares are outstanding and how much is the price per share? Homework #7 Merger with Stocks 200 shares x $10 per share = $2,000 50 shares x $8 per share = $400 [Pre-Merger] Firm A Firm B Firm A is making a cash-and-stock offer to acquire firm B. Firm A intends to offer $12 for each of firm B's shares. The $12-offer consists of 0.8 of firm A's shares and $2 cash. 1. (20 pts) If the offer is an accurate assessment of the valuations of the two companies in a merger, what is the synergy of the merger? 2. (20 pts) What are the portions of the synergy that go to firm A and firm B, respectively? 3. (20 pts) What is the equity of the combined company? 4. (40 Pts) After the merger, how many shares are outstanding and how much is the price per share

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