How will the cash‑and‑stock mix ($7.20 cash plus 0.2192 HNI shares per Steel Case share) affect the share price of both companies?

Answer – How the $7.20‑cash + 0.2192‑share‑of‑HNI mix will play out in the two stock prices

Below is a step‑by‑step, “big‑picture” analysis of how the cash‑and‑stock composition of the HNI ↔ Steelcase deal is expected to affect the market price of each company’s shares. All points are derived from the information in the news release (i.e., the transaction structure, total consideration, and exchange ratio). No external data are used.

1. What the deal actually says

The total consideration is the sum of the cash paid and the market value of the HNI shares that will be issued. The price that each Steelcase shareholder receives therefore depends on the *current market price of HNI*.

2. Immediate effect on Steelcase’s share price

1. Implicit “total price per share”
   [ \text{Total per‑share value} = \$7.20\;+\;(0.2192\times\text{HNI_price}) ]
   

Example (for illustration only)

- If HNI trades at $100 a share → 0.2192 × $100 = $21.92 in stock.

- Total value = $7.20 + $21.92 = $29.12 per Steelcase share.

The market will therefore try to align Steelcase’s share price with the combined cash‑plus‑stock value above.

1. Premium vs. pre‑announcement price

   • The market will compare the $7.20 cash plus the market‑valued share component to the last closing price of Steelcase before the announcement.
     
   • If the implied total ($7.20 + 0.2192 × HNI price) is higher than the prior close, the Steelcase price should jump upward toward that level, reflecting the premium paid by HNI.
     
   • Conversely, if the market perceives the overall value as low (e.g., because HNI’s share price is depressed), the Steelcase price may settle below the headline $7.20 cash component alone.

2. Cash‑only portion

   • The $7.20 cash component is immediate, guaranteed cash for each Steelcase share. Even if the market discounts the stock portion (e.g., if HNI’s stock falls after the announcement), the cash part remains a floor to the price. In practice, investors treat the cash component as a minimum floor for Steelcase’s post‑announcement price.

3. Immediate effect on HNI’s share price

3.1 Dilution from the stock portion

• What is diluted?

  • The 0.2192 HNI shares that will be issued for each Steelcase share increase the total number of HNI shares outstanding. Existing shareholders now own a slightly smaller percentage of the enlarged pool.

• Rough dilution calculation (illustrative – uses the same hypothetical HNI price of $100)

1. Determine the number of new HNI shares issued
   
   [
   \text{New shares} = 0.2192 \times \text{(total Steelcase shares)}
   ]
   
   The exact number cannot be calculated from the release because the number of Steelcase shares outstanding is not given. However, the ratio (0.2192) tells us that for every 1 existing HNI share, about 0.22 new shares will be added for each Steelcase share outstanding.

2. Approximate dilution % (using a simplified example)
   
   Assume HNI has 200 million shares outstanding. If Steelcase has 50 million shares, the transaction would create:
   
   [
   0.2192 \times 50\;\text{M} = 10.96\;\text{M new HNI shares}
   ]

   Total HNI shares after the deal = 200 M + 10.96 M = 210.96 M.

   Dilution = 10.96 M / 210.96 M ≈ 5.2 %.

3. Share‑price impact

   • The dilution alone exerts downward pressure on HNI’s share price, because each existing share now represents a slightly smaller claim on the company's earnings and assets.
     
   • In a purely dilution‑only world, the price would drop roughly in proportion to the dilution (≈ 5 % in this illustration) before any offsetting synergy or earnings‑growth effects are considered.

3.2 Cash outflow

• HNI will pay $7.20 in cash for each Steelcase share. This cash will be taken out of HNI’s balance sheet.
  
• The cash‑payment cost reduces HNI’s cash and potentially its net‑debt position. The market will subtract the present‑value of the cash outflow (≈ $2.2 billion) from the equity value of HNI. The per‑share effect depends on the size of HNI’s market‑capitalization (which we do not have), but the larger the cash outlay relative to HNI’s market cap, the larger the expected drop in HNI’s share price.

3.3 Expected net change

If the market believes the acquisition will generate significant earnings or cost‑saving synergies (e.g., complementary product lines, cross‑selling, higher margins, or a stronger global footprint), the positive synergy premium can offset much of the dilution and cash‑out impact, potentially leaving HNI’s stock unchanged or even slightly higher. If, however, investors see the transaction as over‑priced or the synergies as uncertain, the net result will be a decline in HNI’s price.

4. Interaction between the two stocks

Because the stock component is tied directly to HNI’s market price, the two shares become linked:

• If HNI’s price climbs after the announcement (e.g., because investors buy the stock hoping for post‑deal synergies), the total consideration per Steelcase share (cash + stock) rises. That makes the Steelcase offer more valuable, which can push Steelcase’s price higher (the “stock side” of the deal becomes more valuable).
  
• If HNI’s price falls (e.g., because of concerns about dilution or cash drain), the stock portion of the deal becomes less valuable. The total per‑share consideration falls, which can cap Steelcase’s price near the cash component and may even cause a re‑assessment of the premium. In a very adverse scenario, Steelcase’s price may stay only slightly above $7.20.

Thus the two market prices move in the same direction, but the magnitude of movement is different:
* Steelcase moves up (or at least up to the total cash‑plus‑stock value.
* HNI moves down (from dilution + cash outflow) but may be offset by a rise if the market believes the acquisition adds long‑term value.

5. Summary of the expected share‑price impact

Bottom‑line answer to the question

How will the cash‑and‑stock mix affect the share price of both companies?

• Steelcase: The share price will be driven up to the sum of the $7.20 cash payment plus the market value of 0.2192 HNI shares for each Steelcase share. The cash portion sets a floor; the stock portion adds a variable component that moves in step with HNI’s price. The market will price Steelcase close to the total “cash‑plus‑stock” value, which will be higher than its pre‑announcement price if the offer represents a premium.

• HNI: The share price will experience downward pressure from two sources:

  1. Dilution—issuing 0.2192 new shares per Steelcase share increases the share count and reduces each existing shareholder’s claim on the company’s earnings.
     
  2. Cash outflow—the $7.20 cash per Steelcase share is a sizable cash payment that reduces the company’s cash reserves.
     

The net effect will depend on how the market values the expected synergies of the acquisition; if investors see strong strategic benefits, the downward pressure may be partially or fully offset. Otherwise, HNI’s share price should drop roughly by the amount of dilution plus the effective per‑share cash cost (relative to HNI’s market capitalisation).

In short, Steelcase’s shares should move up toward the total deal price, while HNI’s shares are likely to move down, reflecting dilution and cash‑out, unless the market believes the acquisition will create sufficient upside to compensate for those impacts.