Company A: $12 share price, 20 shares, $400 of NI. Company B: $10 share price, 12 shares, $400 of NI. If A buys B in an all-stock deal at a 20% premium, is the deal accretive or dilutive, and by how much?

Question

IBPrep · Accepted Answer

B's equity value = $10 x 12 = $120. At a 20% premium the purchase price is $144.

Company A: $12 share price, 20 shares, $400 of NI. Company B: $10 share price, 12 shares, $400 of NI. If A buys B in an all-stock deal at a 20% premium, is the deal accretive or dilutive, and by how much?

Answer

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