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Percentage of the total synergies

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Reference no: EM133112485

Acquirer (ACQ) and Target (TAR) enter into merger agreement and make the following announcement:

  • ACQ will acquire 100% of the equity of TAR in an all-stock purchase
  • The purchase consideration is valued at $5 billion based on the pre-announcement stock purchase of ACQ at $50 a share. The announced purchase consideration is a 25% premium for the TAR equity.
  • ACQ will also assume the entire pre-merger debt of $1 billion of TAR. ACQ also has $2 billion of its own pre-merger debt.
  • After the merger, original ACQ stockholders will be hold 66.67% of the equity in NewCo equity and the original TAR stockholders will own 33.33% equity stake in NewCo.
  • Prior to the merger there are 200 million ACQ shares and there are 200 million TAR shares.
  • Synergy generated in the merger = $3 billion.

What percentage of the total synergies do the original ACQ stockholders get?

Reference no: EM133112485

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