Alpha Inc., has just announced that it will be acquiring Bravo Inc., for $25/share in an all-cash deal. On the day of the announcement, Alpha’s stock price declined from $42/share to $40/share, while that of Bravo Inc. increased from $12/share to $22/share. Which of the following can be inferred based on this information?

1. On the day of the announcement, the arbitrage discount is $3/share
2. On the day of the announcement, the arbitrage discount is $13/share
3. The acquisition premium in the deal is 83.33%

1. I only
2. II only
3. I and III
4. II and III
5. III only

Answer rating: 100% (QA)

OPTION A Only I is correct Alpha will acquire bravo at 25 per share ... View the full answer