Firm B's 1 million shares of stock currently sell for $12 each,but firm A is preparing a tender offer of $18 per share.Firm A estimates the NPV of the merger to be $5 million.What percentage of the merger gains will be captured by firm B's stockholders?

Question

Quizplus · Accepted Answer

Firm B % of gain = [($18 − $12) × 1m] / {[($18 − 12) × 1m] + $5m} = 0.5455, or 54.55%

Firm B's 1 Million Shares of Stock Currently Sell for $12