Framingham Flange Factory Case Summary

4. What are the advantages and disadvantages of the 1987 buyout, viewed as a financial program?

a.How much business risk is associated with Sterling’s proposed acquisition of the germicidal, sanitation, and antiseptic products unit of Montagne Medical?

In early May 2008, talk began between president of Flinder Valves, Bill Flinder and Tom Eliot, chairman and CEO of RSE about a possible acquisition of Flinder Valves by RSE. The industrial manufacturing industry had taken a hit due to rough economic times and the acquisition made sense. Both leaders were very concerned about the challenges and risks of the deal. Flinder was a company that engineered and manufactured specialty valves and heat exchangers. These products required extensive research and development and they were one of very few firms working in these types of applications. A bullk to FVC’s sales came from defense and aerospace applications. They were known for their

A. Stock issuance costs are a part of the acquisition costs and the direct combination costs are expensed B. Direct combination costs are a part of the acquisition costs and the stock issuance costs are a reduction to additional paid-in capital C. Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital D. Both are treated as part of the acquisition price E. Both are treated as a reduction to additional paid-in capital 12. Lisa Co. paid cash for all of the voting common stock of Victoria Corp. Victoria will continue to exist as a separate corporation. Entries for the consolidation of Lisa and Victoria would be recorded in A. A worksheet B. Lisa's general journal C. Victoria's general journal D. Victoria's secret consolidation journal E. The general journals of both companies 13. At the date of an acquisition which is not a bargain purchase, the acquisition method A. Consolidates the subsidiary's assets at fair value and the liabilities at book value B. Consolidates all subsidiary assets and liabilities at book value C. Consolidates all subsidiary assets and liabilities at fair value D. Consolidates current assets and liabilities at book value, long-term assets and liabilities at fair value E. Consolidates the subsidiary's assets at book value and the liabilities at fair

Two main risks need to be considered with this acquisition. The first risk is the contingent liabilities arising from Elson’s compensation and accumulated earnings from PTI’s interest-earning assets. Lane should provide the bank information on the accountant’s opinion on these contingent liabilities as rationale the bank’s valuation needs to discount them from their asking price.

SET IN MAY 2008, THIS CASE REFLECTS THE SEPARATE PERSPECTIVES OF CHIEF EXECUTIVE OFFICERS TOM ELIOT AND BILL FLINDER AS THEY APPROACH THE NEGOTIATIONS OF RSE INTERNATIONAL CORPORATION TO ACQUIRE FLINDER VALVES AND CONTROLS INC. YOUR TASK IS TO COMPLETE A VALUATION ANALYSIS OF THE TARGET AND BUYER AND TO NEGOTIATE A PRICE

Immediate Issue: As Andrew Grove, during my meeting of December 17,1994 with my internal team, Should I approve replacing the defective Intel chips of all concerned users with no-question asked? Also, should we also pay for the labor and other incidental costs? How should we integrate our decision into our financial books?

4. Would you acquire Royal 's linerboard and box mill operations? If so, what price would you pay?

Analysts estimate that the $80 million in cost saving could be realized after the acquisition , however certain other costs associated with the integration approximately $130 million would occur .Hence, I take these cost savings and integration costs into consideration for the with-synergies valuation. Incorporating the effects of 80million cost savings for the merged firm (to be achieved by end of 2007 and assumed to incur in perpetuity then on) and 130 million integration costs (half of this accounted at the beginning years) in the estimated EBITs for Torrington, a new horizon value is estimated, the new FCF is discounted by acquiring company’s WACC 8.39%. Torrington company’s with- synergies valuation $1386.38 million exceeds the value as a stand-alone entity by approximately $286 million. sheet2: With-synergies Valuation of Torrington-DCF Method.

The net present value (NPV) of each option has been calculated and included in Table 1, based on figures from the study group report. Unfortunately, these figures are flawed in the same manner as Wriston’s current performance and accounting mechanisms in that they don’t properly allocate revenue, nor do they recognize inherent manufacturing complexities. The plant closure option’s expected operational gain seems particularly suspect. A better valuation of the new plant options is perhaps

Currently Atlantic’s existing Ohio linerboard mill produces 780 tons per day of linerboard, which represents a mere 1.8% of the nation’s linerboard capacity. This is far below the 150,000 tons of linerboard that Atlantic purchases every year from its competitors. Consequently, with such a tight market, linerboard could either become unavailable or available at very expensive prices. If Atlantic pursues their acquisition strategy in purchasing the linerboard mills from Royal, this could help greatly in strengthening Atlantic’s linerboard capacity and ensure to retain their box plants profits. With Royal’s current Monticello mill producing kraft paper and linerboard, this would require $140.8 million to convert all of the mill’s kraft capacity to

This finance simulation is based on the simulation for the merger & acquisition deal to value the M&A activity that occurs in 2003 between Blackstone and Celanese. This case study is meant to provide the deal details from the point of view of the Blackstone.

The presented analysis, recommends in our opinion, the best course of action in the proposed acquisition of the Torrington Company:

2. Is the price of $319 million reasonable for the Monticello Mill and Box Plants based on a cash-flow analysis? Assume cash flows consistent with Table A, Table B and Exhibit 3, a discount rate of 13%, and a terminal value equal to the book value of assets in1993.

* Exhibit 5 shows us that there is 51,600 tons of ductile iron return available from the casting plants to be transferred to the pipe making plant in Radford. The excess ductile iron return available from the Radford plant can be calculated by taking the ductile iron return tonnage available for the Lynchburg and Archer Creek plant and subtracting the amount necessary for the 40% of charge. This left you with the excess available for the Radford Pant which is 6,000 tons.