The Shareholders of 123 Inc

Multiple Choice

The shareholders of 123 Inc.and 456 Inc.wish to engage in a Business Combination whereby each of the companies would acquire all of the voting shares of the other.On that date,123 Inc had 120,000 shares outstanding with a book value of $2,000,000,while 456 Inc had 100,000 shares outstanding,also with a book value of $2,000,000.On that date the fair market values of 123 Inc.and 456 Inc.were $2,200,000 and $1,500,000 respectively.Assuming that each share entitles the shareholder to one vote,which company (if any) can be identified as the acquirer?

A) No acquirer can be identified,since the Book values of both companies are the same.
B) 456 Inc.is deemed to be the acquirer since it will own a majority of the voting shares of the combined entity.
C) 123 Inc is deemed to be the acquirer since it holds more voting shares on the date of acquisition.
D) 456 Inc is deemed to be the acquirer since its shares will have a greater market value than those of 123 Inc after the acquisition.