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New shares

Nnandinigirish13y ago
Dear tutor,

Please can you clarify this:

When a predator company whats to buy target company:
1.P offers his 5 shares to T in exchange of 6 shares in T.

My question is: is that always the predator company needs to issue new shares to buy co T shares.

Thanks in advance.
Nandu
John MoffatJohn MoffatTutor13y ago#1
It is the predator company that will have to pay something to buy the target company.

They can pay in various ways (they could, for example, pay cash!), but if they choose to pay by issuing shares, then it is always the predator company that will issue new shares to give to the target company shareholders as payment.
Ddazhong070313y ago#2
Since target company also gives shares to predator company, can it consider as target company acquires predator company? Thanks.
John MoffatJohn MoffatTutor13y ago#3
When the predator company takes over the target company, the shares in the target company are cancelled - it no longer exists as a separate company (however the predator company pays for them). So in no sense does the target company take over the predator :)
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