When we buy back stock and it becomes Treasury stock, it is removed from the outstanding. When we issue those same shares to complete the acquisition, it will increase the outstanding, thus dilution. Altho I hear pappythom's argument - if we get equal value (in assets) for the stock issued the overall value of the company is not really diluted. However, when calculating eps there is dilution because you are now using a higher outstandiong number is your calculation.