empire - students F23 (1)

.pptx

School

University of Waterloo *

*We aren’t endorsed by this school

Course

373

Subject

Finance

Date

Jan 9, 2024

Type

pptx

Pages

16

Uploaded by BrigadierTitaniumTrout16

Report
Case 11: Empire Group Limited
Empire Prep Assignment submit single pdf file to Learn by 8a.m. Monday Nov 27th Assess the situation arising in the case. Analysis: Estimate the value of Oshawa as a stand-alone company, and the value of the projected synergies with Empire. Recommendation 1: How much (total $) would you offer? Why? Additional information: the offer to Oshawa shareholders will include cash and shares as consideration. The shares will be in Newco's equity; the cash payment will include $200M directly from Empire plus the proceeds from new debt issued by NewCo . Analysis: Use the TEV/EBITDA method to value Empire's Food Division , assuming 37% of Empire's EBITDA is attributable to the Food Division. Analysis: Estimate the TEV of NewCo (New Sobey's), a firm that merges Oshawa with the Empire Food division. Estimate the Equity value of Newco = TEV – Debt value, given that no debt is transferred from Empire to Newco. Recommendation 2: What combination of shares of Newco versus cash would you offer? [Hint: keep in mind the preferences of the main stakeholders: The Wolfe's prefer mostly cash as payment; Empire requires majority ownership of all companies; target leverage is 30% for Newco)].
Case Objectives: Evaluate an M&A opportunity in the context of the Canadian grocery industry. Identify strategic issues surrounding the bid. Value the target (Oshawa) as a standalone firm Evaluate additional synergies produced in an acquisition. Incorporate a “pure play” restructuring Recommend an amount to offer for the acquisition, and how to structure the deal to meet the objectives of the main players.
Assess the situation 1. Role: Who are we? 2. Issue: Why are we here? 3. Who are the focal stakeholders in the case? 4. Alternatives: What could we possibly do? 5. Criteria: To choose between the alternatives, what matters ?
Qualitative analysis What are the characteristics of the grocery business in Canada? What are the key success factors? What strengths and weaknesses does the Oshawa Group possess? What are the synergies associated with a potential takeover offer? What strategic issues are associated with a potential takeover offer ?
Quantitative Analysis: Valuing Oshawa Use the spreadsheet to determine: The value of Oshawa Group as a stand-alone company, based on estimates obtained using: i. the DCF method (assume terminal growth rate = 5%), and a target Debt/Capital ratio of 30% (as distinct from the current 12.4% in Exh 9). Assume moving to target leverage would decrease their debt rating to “BBB” ii. the TEV/EBITDA multiple method (exh 9) The value of the synergies (using the DCF method only) The total value of Oshawa to Empire (i.e., the maximum Empire can pay before the NPV of the acquisition goes negative). The total value created (total NPV) of the deal. How much to bid, using information in the case (precedent transactions, assessing the situation, judgement)
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
  • Access to all documents
  • Unlimited textbook solutions
  • 24/7 expert homework help