Why I passed on CTD., page-78

Apologies for my fundamental lack of understanding of how stocks are valued. It's a miracle that I fooled my various employers for so long.

Taking your example, the notional cap of the combined company would rise from $1bn to $2bn. But no value has been created as you have paid out $1bn in consideration. Reported EPS would however rise enormously. More than likely the PER would rises too as investors anticipate more earnings enhancing deals, so the share price gets a double boost. And the execs get a triple boost, as their SARs are linked to EPS growth! This is the magic sauce I was referring to.