Weston Bakery and Early's Bakery are all-equity ﬁrms. Weston's has 1,200 shares outstanding at a market price of $16 a share. Early's has 1,500 shares outstanding at a price of $27 a share. Early's is
Acquiring Weston's for $24,000 in cash. What is the merger premium per share?
A) $0
B) $4
C) $6
D) $9
E) $11

Question

Quizplus · Accepted Answer

The merger premium per share is calculated as the difference between the offer price per share and the market price per share. Weston Bakery's market price per share is $16, and the acquisition price per share is $24,000 / 1,200 shares = $20. The premium is $20 - $16 = $4 per share.

Weston Bakery and Early's Bakery Are All-Equity ﬁRms