Milner - Poudre
Milner Manufacturing plans to acquire Poudre Chemicals, by giving Poudre shareholders 1.75 shares of Milner stock per share of Poudre. There are 2 million shares of Poudre Chemicals outstanding, with a pre-merger-offer price of $25 per share, and Milner’s pre-offer stock price is $16.50.

-What is the control premium being offered by Milner Manufacturing?

Question

Milner - Poudre
Milner Manufacturing plans to acquire Poudre Chemicals, by giving Poudre shareholders 1.75 shares of Milner stock per share of Poudre. There are 2 million shares of Poudre Chemicals outstanding, with a pre-merger-offer price of $25 per share, and Milner’s pre-offer stock price is $16.50.

-What is the control premium being offered by Milner Manufacturing?

Quizplus · Accepted Answer

The control premium is the difference between the pre-merger-offer price and the value of the offer. The value of the offer is the number of shares of Milner stock offered per share of Poudre multiplied by the pre-offer stock price of Milner. In this case, the value of the offer is 1.75 * $16.50 = $28.875. The control premium is $28.875 - $25 = $3.875 per share.

Milner - Poudre Milner Manufacturing Plans to Acquire Poudre Chemicals, by Giving Poudre