ibrandybuck, I am not facetious -- I am perfectly serious. If you doubt how this is done, look at the acquisitive history of a company like NETA or CA. Increasing the number of authorized shares does not create dilution per se. It depends on what you do with those shares. For example, using them for employee stock options dilutes the ownership of the total company, and dilutes the percentage of equity a shareholder has. But in using them to purchase another company it depends on various factors. Here's a simple example. Suppose you have two companies with equal eps and equal growth prospects, each with $100 MM in assets and no liabilities, and each with 100 MM shares outstanding. If company a acquires company B through a stock swap by trading one of its shares for one of B's shares the shareholders in the respective firms come out whole, because although their ownership position in the combined corporation is cut in half, the size of the company has doubled. You will end up with a firm with $200MM in assets with 200MM shares outstanding. Now, there are many more issues involved, such as earnings, growth in earnings, acquisition premiums, etc. Ultimately, all mergers are driven (or ought to be) with the idea that the hybrid company will achieve greater earnings than the sum of the two separate companies. And if the merger is really good, it may allow for faster top line growth through cross-selling. In the case of ASND/LU, those factors are frequently cited as drivers.
So the issue is not the price of the respective shares of stock at the margin, but the relative values of the two companies.
TTFN,
CTC
BTW, I used to do M&A work. |
