Rudy's and Blackstone are all-equity ﬁrms.Rudy's has 1,500 shares outstanding at a market price of £22 a share.Blackstone has 2,500 shares outstanding at a price of £38 a share.Blackstone is
Acquiring Rudy's for £36,000 in cash.What is the merger premium per share?

Question

Quizplus · Accepted Answer

The merger premium per share is calculated as the difference between the offer price per share and the current market price per share. Rudy's is being acquired for £36,000, and with 1,500 shares outstanding, the offer price per share is £36,000 / 1,500 = £24. The current market price per share is £22. Therefore, the merger premium per share is £24 - £22 = £2.00.

Rudy's and Blackstone Are All-Equity ﬁRms