Whipple Industries is considering the acquisition of the Blanchard Company in a stock-for stock exchange. Selected financial data for the two companies is shown below. No synergy is expected in this merger.
Determine the post-merger earnings per share if the Blanchard company shareholders accept an offer of $22 per share in a stock-for-stock exchange.

Question

Whipple Industries is considering the acquisition of the Blanchard Company in a stock-for stock exchange. Selected financial data for the two companies is shown below. No synergy is expected in this merger. 
Determine the post-merger earnings per share if the Blanchard company shareholders accept an offer of $22 per share in a stock-for-stock exchange.

Quizplus · Accepted Answer

Solution:
Number of new shares = 2 million ($22/$40) = 1.1 million
EPS post-merger = ($25 + $3.5)/(8 + 1.1) = $3.13

Whipple Industries Is Considering the Acquisition of the Blanchard Company