Repsol YPF valuation Essay

Another option is the issuing of preferred stock, the company’s common stock is already overvalued in the market; therefore, sourcing additional capital through common stock might result to lower proceeds.

2. Do you favor the proposed acquisition of UCP? What are the primary sources of value in such a transaction? Is the proposed price reasonable?

o Cost of debt in this case is 12.5% though MCI can raise $ 100 million more with this option in comparison to option (a) above. Servicing this debt would be a significant drain on the cash flow. o Please see Exhibit 3. (c) $600 million Convertible offering @ 7.625% 20 year with conversion at 54 per share o Using this option MCI can raise $ 100 million more than option (b) at 4.88% lower rate of interest. It also gives MCI an option to convert it to equity once the stock price reaches 54 (it is currently 47). Based on previous convertible offerings (As per exhibit 6 of case, 1978, 1979, 1980, 1981 and 1982), MCI has been converting it to equity within 18 months because of its high growth. As higher growth is projected for the next few years (Exhibit 9 of case), MCI is expected to convert this $600 million offering to equity, thereby reducing its leverage. o This option allows to finance its current activities and match capital inflows with expected investment outlays in the near future. It also allows MCI the option to eliminate the cash flow drain from servicing the debt once the stock price increases. o As per Exhibit 3 attached here, this offering will provide capital to meet the external financing needs for 1983.

In general, using external funds, i.e. debt or equity, to finance increasing growth is riskier to the corporation. When issuing debt the company needs to be certain to cover both the repayment of the principal and the interest payments on time (because if they do not this could cause them to have problems securing financing in the future). When issuing additional shares of stock (equity) the value of existing traded stock is diluted (in proportion) and as such the current ownership might lose control (and may even be voted out by shareholders if dilution is substantial enough). Furthermore, with both debt and equity financing, a fast growing company needs to be aware that payments to either may hamper future expansion because payments that need to be send out in the forms of dividends or interest cannot be retained and invested in future projects.

3. How should the acquisition of MPIS be financed, taking into account the issues of control, flexibility, income and risk?

Three interrogations were thus to answer. Should the company provide investors with classic bonds or give them the opportunity to convert them into equity? Should they structure the offer with a fixed or a floating coupon rate? And last but not least, where should they locate the operation?

* For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.

3. What restructuring option – Icahn’s spin-off proposal or the company’s targeted stock proposal – will create the most value for shareholders? For creditors? For the firm’s other stakeholders?

2. Weak Financial Performance A significant number of its vendors demand accelerated payments or require cash on delivery, such demands could have an adverse impact on its operating cash flow and result in severe stress on its liquidity. A downgrade in its credit ratings or a general disruption in the credit markets could make it more difficult for it to access funds, refinance indebtedness, obtain new funding or issue securities.

1. What are the strengths and weaknesses of Verizon, MCI, and Qwest? Where are the synergies in the proposed combination?

3. What is your assessment of the competitive strength of Kraft Foods’ different business units?

Looking at Exhibit 11, which is a summary of comparable transactions by business segment, the offer for Interco once again fails to persuade. Looking at the average purchase price multiples of comparable transactions (refer to appendix B), it is apparent that the Rales proposal multiples are invariably lower than the industry averages. It would be in Interco's interests to divest and realize the higher earnings themselves, rather than allowing City Capital to take over at such a low offer.

BHP Billiton Restricted (BHP) has the most diversified portfolio of high quality resources in the entire world. All companies have in common the generation and dissemination of minerals and their products, but BHP is the only company which focuses also strongly on petroleum. Therefore BHP has a competitive advantage against rising costs, which have in total a negative effect on the companies’ earnings (BHP Annual report 2013).

1. What ratios are MOST important in assessing current and predicting future value creation for Sears? For Wal-Mart?

the bidding price on Petroquímica Bahia Blanca S.A. (PBB), which was being privatized by the