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I have a question regarding calculation of Percentage gain to shareholder under a share for share exchange offer in a acquisition.
Question:
Sigra Co. wants to acquire Dentra Co with an offer of three of its shares for two of Dentra Company’s Shares.
Sigra’s Share Price = 3.60
Dentra’s Share Price = 4.50
The total Equity Value of combined Co. = 46,913,000
Total no of shares post integration = 12, 875,000
Expected Share Price = 3.644Gain Per Dentro Co. Share = (3*3.644 – 2*4.50)/2 = 0.966
Percentage gain = 0.966/4.50 = 21.5 %Can you please elaborate on how the gain per dentro share of 0.966 has been calculated. I am a little confused here.
They get 3 Sigra shares for every 2 Dentro shares.
The current value of 2 Dentro shares is 2 x $4.50 = $9
The value of the 3 Sigra shares that they will end up with is 3 x $3.644 = $10.932
So for every 2 shares they currently hold they make a gain of 10.932 – 9 = $1.932
This is the gain for every 2 shares, so the gain for every 1 share they currently hold is 1.932 / 2 = $0.966
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