TNT, Inc. is considering making a tender offer for Blasting Caps Corp. (BCC), one of their primary suppliers. The equity section of BCC's balance sheet totals $4.95 million, and BCC stock is currently selling 20% above book value. TNT is planning to offer a 15% premium to make the offer attractive. If BCC has 200,000 shares outstanding, calculate the per share price of the tender offer.

Question

TNT, Inc. is considering making a tender offer for Blasting Caps Corp. (BCC), one of their primary suppliers.  The equity section of BCC's balance sheet totals $4.95 million, and BCC stock is currently selling 20% above book value.  TNT is planning to offer a 15% premium to make the offer attractive.  If BCC has 200,000 shares outstanding, calculate the per share price of the tender offer.

Quizplus · Accepted Answer

The equity value of BCC is $4.95 million. Since the stock is selling 20% above book value, the market value is $4.95 million * 1.20 = $5.94 million. With 200,000 shares outstanding, the current market price per share is $5.94 million / 200,000 = $29.70. A 15% premium on this price is $29.70 * 1.15 = $34.16 per share.

TNT, Inc Is Considering Making a Tender Offer for Blasting Caps