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?

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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 in cash, and with 1,500 shares outstanding, the offer price per share is $36,000 / 1,500 = $24. The current market price is $22, so the merger premium per share is $24 - $22 = $2.00.