Look at a recent example of a merger announcement? Can you work out how much the...

Look at a recent example of a merger announcement? Can you work out how much the targets shareholders will gain from the offer? Is it more or less than would be the case for an average merger?

I selected Roche and Spark Therapeutic merger. Can you please help me answer the two? Thanks

Expert Solution

In this merger Roche will acquire all outstanding shares of Spark Therapeutics for around $4.8 billion. This translates into a per share amount of $114.50.

The target shareholders stand to gain a substantial amount from this merger. The price of $114.50 per share represents a premium of around 122% to Spark Therapeutics closing share price as on February 22, 2019. It is also a 19% premium to the company’s 52 week high share price (which was on July 9, 2018). Also the stock of Spark Therapeutics has a consensus target price of $60.60 and so the Roche’s offer represents a premium of almost 200% from the point of view of the consensus target price.

The quantum of gain for the target shareholders is more than the quantum of gain in case of an average merger. The average gain is not very high and ranges in double digit figures for most of the deals (50% plus). However in this case the premium is 122% (compared to closing price) and around 200% (compared to target price).

jeff jeffy answered 2 years ago

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