Winslow Co. has agreed to be acquired by Ferrier, Inc. for $25,000 worth of Ferrier stock. Ferrier currently has 1,500 shares of stock outstanding at a price of $21 a share. Winslow has 1,000 shares outstanding at a price of $22. The incremental value of the acquisition is $4,000. What is the merger premium per share?

Question

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 of Winslow. The offer price per share is the total acquisition value divided by Winslow's shares, which is $25,000 / 1,000 = $25. The current market price per share of Winslow is $22. Therefore, the merger premium per share is $25 - $22 = $3.