Question about buyouts - Enterp-Value vs Market Cap

When a company buys out a stock, and there is debt involved, does all of the buyout price flow to shareholders, or only all of it minus the debt? I ask because of the Paramount Global discussion. It was reported there was one bid by Apollo for $26 billion…current market cap is roughly $7 billion I think. Just for sake of simplicity, let’s round the bid up to $28 billion.

If the stock is trading at roughly $11, and the $28 billion bid was accepted, would that mean the stock would trade close to $44, theoretically? Or, does one have to subtract out debt, and thus it would be meaningfully less than $44?

I am assuming shareholders would not get the debt portion, but would get the portion related to cash…would that be correct? Which I suppose leads to another question: does market cap include cash levels?

Thanks in advance!

All that usually gets determined in the deal making. Usually the debt goes with the deal. I am not aware of any where share value was reduced by debt.

But if a bankruptcy is involved existing shareholders might lose their equity. Then a judge decides or approves.


Thank you for the reply. Interesting to me that you said it could depend on the exact deal…I thought it might be an objective thing, but that does make sense to me.

I appreciate this explanation…