Reference no: EM133132233

Question - A Company is interested in a merger with B Company. B Company is growing very fast and the price of its shares has risen rapidly. The two firms will continue as separate companies after the merger, with one being a subsidiary of the other. However, the two parties are having difficulty agreeing to a price. They have agreed that A Company will issue shares to B Company shareholders and then both A's original shareholders and B's former shareholders will own A company. Three scenarios are under review as shown below.

	Scenario
	1	2	3
Number of shares outstanding of A Company	1,000,000	1,000,000	1,000,000
Price of one A Company share	$25	$25	$25
Number of shares outstanding of B Company	250,000	250,000	250,000
Price of one B company share	$50	$50	$50
Consideration given	3 shares of A for 1 share of B	4 shares of A for 1 share of B	5 shares of A for 1 share of B

Required -

(a) For each scenario, determine who owns the shares of A Company and B Company after the merger.

(b) For each scenario, determine which shareholder group is in control of A Company after the merger.

(c) For each scenario, determine which company is the parent company and which is the subsidiary after the merger.