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Hi John,
Can you please explain why the gain in value to a Nente Co share (June12-Q1) is using the combined share price : ($10.26 – $8.70)/$8.70, where $5.13/share is calculated by using the combined earnings/shares in combined company
Meanwhile in June13-Q2,
The gain in value to a Strand Co is using current Hav Co’s share price of $9.24 not the combined share price : (29.603.2m/3,000m shares) = $9.87The answer is [($1.33+$4.62)-$4.76/4.76] why not [($1.33+$4.94)-$4.76/4.76]?
Thank you!
It really depends from whose point of view you are looking at it.
If you are asked which option the shareholders in the company being acquired are likely to prefer, then they will probably not know the synergy benefits and are more likely to base their decision on the existing share price of the acquirer.
On the other hand,if we are calculating what premium they are likely to end up with, then we do know about the synergy etc. and should look at the combined share price.
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