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Silver Enterprises is planning to acquire Jurion Inc. Silver Enterprises has 8,300 shares outstanding with a...

Silver Enterprises is planning to acquire Jurion Inc. Silver Enterprises has 8,300 shares outstanding with a share price of $46 and Jurion Inc. has 3,400 shares with a share price of $21. The synergy gains from the acquisition are expected to be $12,600

A. If Jurion Inc. is willing to be acquired for $24 per share in cash, what is the NPV of the merger? B. What is the price per share of the merged firm? C. What is the takeover premium?

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Answer #1

A.NPV of mereger = Present value of benefits - cash paid

= 3,400*21 + 12,600 - 3,400*24

= $2,400

B. Price per share of merged firm = (8,300*46 + 3,400*21 + 12,600- 3,400*24)/8,300

= $46.29

Takeover premium = 24-21 = $3

or 3/21 = 14.29%

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