Selorne Co Sep 2018

Can you please explain the explanation of Part a ii of the examiners answer. It asked to comment on your results and based on the answers where I found the gain for each company shareholders and the % gain, I mention ‘The gain attributable to Chris Chawon is $10m (a percentage gain of 16.8%) and $25.8 million to Selorne Co sharehodlers (a percentage gain of 8%). Therefore, Chawon Co is getting a higher portion of the additional value created from the combined company.

Examiner answer:

Chris Chawon will have a 16·7% (10m/(50m + 10m)) shareholding in the combined company but 28·0% ($10m/$35·7m) of the gain on the combination will be attributable to him. Shareholders who are doubtful about the merger may question whether this is excessive, as possibly Chawon Co’s desire to sell is being prompted by the company struggling to remain solvent.

I am struggling to understand examiners answer as I do not calculate the % shareholding in the combined company for Chawon and the percentage gain I get is 16.8% (Gain/old value *100) not 28%.