  This article extends, in a stochastic environment, the Yagil (1987) model
which establishes, in a deterministic dividend discount model, a range for the
exchange ratio in a stock-for-stock merger agreement. Here, we generalize
Yagil's work letting both pre- and post-merger dividends grow randomly over
time. If Yagil focuses only on changes in stock prices before and after the
merger, our stochastic environment allows to keep in account both shares'
expected values and variance, letting us to identify a more complex bargaining
region whose shape depends on mean and standard deviation of the dividends'
growth rate.
