Question #10
Reading: Reading 18 Corporate Restructuring
PDF File: Reading 18 Corporate Restructuring.pdf
Page: 5
Status: Unattempted
Question
Petra Zimuth, CFA, is analyzing an announced acquisition. Under the terms, Apollo, Inc., is to be taken over by Bastille, Inc., at a price of $65 per share. Last week, Apollo stock was trading at a price of $48 and increased to $55 in anticipation of the announcement. The offer premium is closest to:
Answer Choices:
A. 35%
B. 18%
C. 44%
Explanation
Deal price (DP) = $65. Unaffected price (UP) = $48. Premium = (DP – UP) / UP = 17 / 48 =
35.4%.