Rudy's, Inc. and Blackstone, Inc. 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 is the difference between the acquisition price and the market price per share. In this case, the acquisition price is $36,000 and the market price per share is $22. Therefore, the merger premium is $36,000 / 1,500 shares = $24 per share.