Trx Case

We also know that Louis was contemplating a possible IPO exit strategy before the end of the holding period term. To estimate a multiple for this IPO exit, we need to look at the Price/Earnings ratio for Dollarama. Using the same methodology as above, we compared Dollarama to the same group of companies and computed the average P/E ratio for the set, see Exhibit 6a. We will consider the values for the year 2005 and will take a multiple of 24.6 for an eventual IPO exit.

Profitability of oil companies declined due to low prices; and most of these firms responded with cost-cutting measures. Many top companies divested their marginal properties, seeking to consolidate and rationalize their productive assets- one of which was Amoco Corporation. Amoco Corporation conducted an extensive review of its cost structure and profitability (p.2), leading to major restructurings to better focus on its core businesses. The result of this was a divestment of the middle section of its assets along marginal curve. Morgan Stanley advised and assisted in the process, creating MW Petroleum Corporation – a new, free-standing exploration and production oil and gas company. MW was offered to a number of targeted international petroleum concerns, but the most attractive offer came from Apache Corporation. Apache Corporation was an independent oil and gas company based in Denver, Colorado engaged in exploration, development, and production of oil and natural gas. Their strategy, “rationalize and reconfigure” involves acquiring producing properties whose operations Apache could quickly control and make more efficient, producing significant cost-saving opportunities for the company. The sale of MW Petroleum provides such an opportunity for them. However, Apache must first carefully evaluate MW’s value to come up with a proposal that would be attractive for Amoco and profitable for Apache as well. CRITICAL ANALYSIS

Which, if any, of the following initiatives undertaken by Ratan Tata do you think were good ideas?

This case involves a male and female Hispanic, entering TJ Maxx during business hours, and concealing various items in their bags. The suspects attempted to leave the store without paying for the items. Loss Prevention Agent Sergio Castro made contact with the suspects at the front entrance and retrieved all of the loss except for a black Michael Kors purse, valued at $159.99.

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?

Our estimated cost of capital, 20.81%, is lower than Ricketts’ expected return, 30%-50%, thus the investment is worthy. However, it’s higher than other pessimistic members’ expected return, 10%-15%, making the decision more complex and requiring further valuation。

Address the following questions in a 4-5 page write-up of the Boston Beer Company Case to explore the issue of Initial Public Offerings.

4. The case indicates that the company’s “market value” of equity at June 30, 1999 was $460 billion. Compare this to the company’s “book value” of equity. What factors likely explain the difference between these two values?

Address the following questions in a 4-5 page write-up of the Boston Beer Company Case to explore the issue of Initial Public Offerings.

in our calculations, as this company exhibited dramatic value differences to others in the sample, (likely to skew our results and prove misleading). Using the average of the revised sample field for each ratio, we inserted Torrington’s values where appropriate to generate an entity value. The findings generated two values for Torrington, 606 million and 398 million. Taking the average of these two numbers, Torrington exhibited a relative value of 502.41 million. Because of the lack of related information given in the case, and the often large differences in measures amongst competitors, different capital structures, internal management strategies, there remained many unknowns in our model. We decided it would be best to use this valuation to reaffirm our assumptions in our DCF valuation. (Please see exhibits)

In a first step we have to postulate when the successful exit is going to happen. Normally this period is assumed to be between 3 and 7 years long. In our case, we make the assumption that a successful exit is going to happen in 1999. Since we are only concerned about the successful scenario, we go along with the projection of AccessLine, which is probably overoptimistic, and use its expected revenue of 208M at the time the exit happens. After the IPO, we presume the company will grow at a high rate for the next five years in the 75 percentile as proposed by Metrick, Andrew and Ayako Yasuda in their “Venture Capital and the Finance of innovation” book. We chose five years since the typical firm reaches maturity within five years after the IPO. Besides, we assume a tax rate of 30.64% given by the industry average (Damodaran 2013). As a discount rate, we use simply the industry average. Alternatively, we could use the Betas of the comparable companies. This gives us an unlevered average beta of 0.5*(1.39+2.03) since both companies are completely equity financed. The risk free rate was given by 7.1%, if we assume a risk premium of 5.79% (Damodaran for 1.4.13) we get a cost of capital of 16.9% using the CAPM equation. Because we only have two comparable companies we opt to do our calculations with the industry wide average discount rate. The operating margin at the exit date is estimated in a way that we reach a Net

Pepsi’s US$360M investment was too expensive. Based on our calculation, this investment was worth almost 60% of Deltex equity. However, in the proposal, Pepsi would only receive 30% of Deltex equity.

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?

The Timken Company – a leader in the bearing industry, is considering acquiring the Torrington Company. Torrington Company, a leading manufacturer of needle roller bearings which is an engineering solution segment from Ingersoll-Rand. Both companies operate and compete in same business and therefore, Timken is seeking substantial operating synergies from this largest acquisition of its history. With this acquisition, Timken is increasing the size of company by almost 50 percent. And, Timken will continue to concentrate on what it do best by buying a company in an industry, where it has a leadership position built on decades of expertise. Timken expects to expand its worldwide business base with new products and services as both companies

As you can see in the graph below, the terminal value for the company if it takes the equity route is about $106M, where if it takes the debt route its terminal value will be about $45M.