Case 51: Brown-Forman Distillers Corporation Essay

1023 Words Mar 17th, 2014 5 Pages
Case Study 4: Corporate Valuation
Case 51: Brown-Forman Distillers Corporation

1. Why is Brown Forman considering buying Southern Comfort? In your answer consider the strategic motives of Brown and the arguments in favour of and against the acquisition.

Producing and selling high-quality products is the company’s marketing philosophy. Although Brown-Forman was the fifth-largest distiller in the United States, it spent a lot of money in advertising support in order to build best brands in the world. In a while, the whiskey market was in a depression. Brown- Forman faced a big challenge to overcome this period. In order to expand its product lines, Brown-Forman chose several of products which has fast growth in the alcohol
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1978 1979 1980 1981 1982 1983
Gross Profit 15421 17796 20092 22491 23445 25139
-SG&A 2095 2580 2424 2500 2668 2449
=EBIT 13326 15216 17568 19991 20777 22690
-Tax 6529.74 7455.84 8608.32 9795.59 10180.73 11118.1
=ERIAT 6796.26 7760.16 8959.68 10195.41 10596.27 11571.9
+Depreciation 0 0 0 0 0 0
-FCInv 0 0 0 0 0 0
-WCInv -9252.6 -4743.4 -5740.8 -6597.4 -8424 -8361.6
FCFF 16048.86 12503.56 14700.48 16792.81 19020.27 19932.5 1984 1985 1986 1987 1988
Gross Profit 27261 28972 31323 32496 32127
-SG&A 2645 2857 3086 3332 3599
=EBIT 24616 26115 28237 29164 28528
-Tax 12061.84 12796.35 13836.13 14290.36 13978.72
=ERIAT 12554.16 13318.65 14400.87 14873.64 14549.28
+Depreciation 0 0 0 0 0
-FCInv 0 0 0 0 0
-WCInv -8782.4 -9877.8 -10178.2 -11825.4 -13219.8
FCFF 21336.56 23196.45 24579.07 26699.04 27769.08
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