Jessi & Jessi (J & J) corp. is trying to acquire Ryan's Tech to create an IT giant with a combined market value of $500 billion. J & J is paying $200 billion for Ryan's. J & J offers to pay the shareholders of Ryan's with stocks. One share of J & J is trading at $100 in the market. And one share of Ryan's is trading at $200.
a. How many shares of J & J would an investor get if she owns 100 shares of Ryan's? (Assume that stock price remain unchanged.)
b. Apple worries that the combined firm will dominate them in the market. So Apple decided to submit a competing offer to acquire Ryan's. With a large amount of cash in hand, Apple is going to use cash to pay the shareholders of Ryan's. To minimize cost, should Apple offer an amount of cash more than, equal to, or less than $200 billion? Why?