Mega Service Corporation (MSC) is offering to exchange 2.5 shares of its own stock for each share of target firm Norman Corporation stock as consideration for a proposed merger.
There are ten million Norman Corp shares outstanding, and its stock price was $60 before the merger offer. MSC's preoffer stock price was $30. What is the control premium percentage offered?
Now suppose that when the merger is consummated eight months later, MSC's stock price drops to $25. At that point, what is the control premium percentage and total transaction value?