Acquisition of a Company by Purchasing Shares

Hypothetical Question

Before the end of Q4 in 2020, Company ABC acquired a 51% stake in Company XYZ by purchasing 51% of common stock. A few months later the Company ABC then acquired 100% of the company.

Company ABC already owns approximately 51% of Company XYZ's issued and outstanding common shares, and the Merger Agreement contemplates, through a reverse triangular merger structure, Company ABC issuing newly-issued shares of common stock in exchange for the balance of Company XYZ's common stock on a one-for-one basis. For example, if a Company XYZ shareholder owns 100 shares of common stock of XYZ immediately prior to closing of the Merger, the shareholder would receive 100 shares of common stock of Company ABC on closing of the Merger.

Is this just simply purchasing a company at market cap? The market cap of Company XYZ doubled from Q4? Why didn't they just purchase 100% in Q4 - It would have been half the price? 

1 Comments
 

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