I had bought 100 shares of company A back in 2009. However, that company merged with company B, and they announced that I will be receiving 1 share of company B for every 8 shares held in company A. Now when I divide 100 by 8, the total is 12.5. Do I get 12 shares or 13 shares in company B? In case I get 12, where does the value of the remaining .5 shares go? In case I get 13, who pays for the excess amount?
They generally issue the extra fraction as cash. When they do a reverse split this is the way to get rid of small investors. They take 1000 shares pre-split and turn it into 1 share post split. If you own less than a share you are given cash.
If those shares are part of a larger fund (ie in a 401K) the fund will take care of this because each member can own fractional shares.
The documentation for the merger should discuss the fractional shares and how they handled and when any cash will be received.