1. Why might Bollenbach have opened his bidding for ITT at $55 per share? What was his likely strategy?
The $55 value is on the lower range of the analyst eztimates, with a best guess estimate of $67.94. Since the value of the stock had been below $45 for 4 months, the offer of 55 dollars represented a 29% premium to investors. Bollenbach knew that management would be resistant of any attempt to be acquired, regardless of price, because of failed previous attempts to negotiate a friendly merger at year end 1996. The 55-dollar benchmark created an expectation for ITT management to achieve that level, or higher and the premium is enough to demonstrate to investors it is a real offer. Their support will be key as they will have a
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Bollenbach knew that the next steps would be critical or the deal to go through. As such it was necessary to first research the investors and arbiters to have better negotiation tactics when the time comes. The resistant board of directors had not changed in the mean time and would likely resist any offer, including the unlikely event of another contender entering bidding. If the price of the stock fell below the $55 range, or the Board of Directors changed Bollenback would likely aggressively negotiate with shareholders to close the deal as quickly as possible.
3. ITT’s value has changed a lot over the recent events. Prior to any offer when ITT’s stock was trading at 43 dollars, the stand-alone value of its equity was 16.4 billion dollars. With the 55-dollar offer to ITT, the company’s value went up to approximately 21 billion. After the offer, the stock was trading at $63.50, which gave the total equity a value of 24.2 billion dollars. With the proposed trivesture proposal, the company would lose synergistic value as three separate companies, compared to one large company. Examples of these include a number of overhead costs which gain economies of scale. In addition, ITT likely has synergistic revenues coming from the fact that it operates all three business segments. Analyst estimates indicate that the present value of the synergies whichh ITT stands to loose with the proposed trivesture have a NPV between $900 and
On April 19, 1997, the company was offered for sale to Mr. Warren G. Hamer. Provided with the exhibits that contain the summary of Terms and Conditions of Sale, audited Income Statements and Balance Sheets, and Company History, Mr. Hamer needs to decide whether or not to place a bid, which is due on April 24. However, Mr. Hamer was
The Candlestick chart has formed a Bullish pattern which suggests that buyers are entering into the stock. The stock should continue higher for the short-term. By looking at Intuit’s charts we can observe that Intuit has had steady gains despite a period of loss between mid-July and mid-August. We can also see that it has a Support at 43.44 and Resistance at 47.42. If it breaks this resistance the stock should continue higher to 50.13. The close proximity of resistance at 47.42 will be focused on as a possible refraction from this level may occur.
The board decided that the company should be judged on its ability to make a profit, gain market share, provide positive ROA and make money for our shareholders with an increasing stock price. Our target was a stock price of $38
According to the researchers the increased value results from an opportunity to utilize a specialized resources which arises solely as a result of the merger (Jensens & Ruback, 1983; Bradle, Desai and Kim , 1983). For creating operational and financial synergies managers believe that two enterprises will be worth more if merged than if operates as two separate entities. Thus, the two companies, A and B:
During pre-negotiation, the goals at the Lambert team was to aim high and be aggressive, thus providing room to negotiation towards target goals: 1) stock ownership of 60/40 ≤ goal of 50/50; 2) provide one seat on the board ≤ goal to agree to
OTT purchased 11 shares of Happy New Year & Co. stock on at $20 a share on Jan. 3, 20X1, and the price dropped to $15 in March and remained steady till Dec. 31, 20X1. OTT management does not believe the decline in price to be
3. At what price would you recommend that Rosetta Stone shares be sold?Rosetta Stone: Pricing the 2009 IPO
Set in May 2005, this case invites the student to assess Berkshire Hathaway’s bid, through MidAmerican Energy Holdings Company, its wholly owned subsidiary, for the regulated energy-utility PacifiCorp. The task for the student is to perform a simple valuation of PacifiCorp and to consider the reasonableness of Berkshire’s offer. Student analysis readily extends into the investment philosophy and the remarkable record of Berkshire’s chair and CEO, Warren E. Buffett.
Exhibit 4 tells us that the stock price of Interco started going up in July from about $44 to $72 on the day of the Board meeting. This tells us that markets anticipated that Inteco is a target for acquisition and increased the stock price of Interco in anticipation of an acquisition premium.
that the bid was too low and that the a bid of US $ 50 would be fair. He noted
2. Evaluate the two offers in Exhibit 7. What explains the two structures? In each case, what is the value to MCI shareholders?
As expected the response from the board was a mix one. Some thought the $25,000 per month bill was rather steep and thought this would drive the facility into more debt, the others thought the stock option was outrageous and were very unhappy. Lloyd Lewis was most unhappy because TM, Inc. did not report to him and the consultant firm was also going to find his replacement.
2. How should Bengier prepare to negotiate an offer price with the underwriters? What is an appropriate price? Should he be concerned about the IPO pricing patterns in case Exhibit 9?
Renegotiating with the third bidder is also a clean exit for Apax with the target buyer partly educated. Unfortunately, another round of negotiation will distract the management from operations, especially when Xerium is being put in the disadvantage side in the negotiation. As the only potential buyer, the third bidder may raise a lot of special requests including but not limited to price and due diligence. Moreover, the bidder has the incentive to “take his time” in making the decision, since the market downturn may further pressure the price.