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Q: Can these two figures be both correct?

 (1) "U.S. West Media group agreed to acquire Continental Cablevision Inc. for $5.3 billion in cash and stock, plus the assumption of $5.5 billion in debt..." (WSJ, 2/28/96, p. A3)

(2) "US West, ... agreed [to an] $11bn stock-and-cash merger with Continental Cablevision." (Financial Times, 2/28/96, p. 1)

A: Yes!

Remember:

  cash flow from assets = cash flow to providers of capital

= cash flow to shareholders + cash flow to bondholders

  Thus,

Value of assets = value of equity + value of debt

  Hence,

$5.3 bn + $5.5 bn = $10.8 bn, approximately $11 bn.

Therefore, the WSJ has divided the value into its basic components, while the Financial Times quoted the value of the company/assets.

Remember, when you talk about value, you need to talk about market value not book value. It is not clear from the article whether the $5.5 bn is the current market value of debt or the amount of debt on the books. Thus, if interest rates have changed considerably since the company issued the debt, there would be a considerable discrepancy between these two values.