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 …show more content…
Below are the FCF estimates relevant to the merger of ITT from Hilton 's perspective, and a sensitivity analysis based on possible discount rates: Value of ITT to Hilton Lodging $ 355 $ 127 $ 102 $ 159 $ 213 Gaming $ (598) $ (11) $ 195 $ 213 $ 235 Education $ 19 $ 24 $ 27 $ 31 $ 35 World Directories $ 355 $ 127 $ 102 $ 159 $ 213 Trivesture Synergies 69 72 75 78 81 Merger Synergies 100 100 100 100 100 Terminal Value $ 14,114 Discount Rate Enterprise Value Debt Value of Equity Price Per Share 7.00% $12,409.12 $4,000 $8,409.12 $72.49 7.50% $12,140.72 $4,000 $8,140.72 $70.18 8.00% $11,879.52 $4,000 $7,879.52 $67.93 8.50% $11,625.30 $4,000 $7,625.30 $65.74 9.00% $11,377.85 $4,000 $7,377.85 $63.60 9.50% $11,136.93 $4,000 $7,136.93 $61.53 10.00% $10,902.37 $4,000 $6,902.37 $59.50 10.50% $10,673.95 $4,000 $6,673.95 $57.53 11.00% $10,451.49 $4,000 $6,451.49 $55.62 4. What do you expect the price of ITT’s equity would be if Hilton’s bid were to fail? Would it collapse to its pre-tender-offer trading value of around $44? Would it remain stable at its existing level of around $60, or would it rise to meet
3. How do the various features of the BW/IP buyout affect the company’s decisions about long-horizon opportunities such as the UCP acquisition?
1. What is Brazos’ investment strategy? Does it seem well suited for its position as a first-time fund? How do you assess the merits of the GTT transaction?
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
If the company did go public, its share price should be $384.37 for per share with the rapid growth scenario.
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
Purchased plant for good price…with new equipment and deleted marginal product lines as they expanded nationally
3. At what price would you recommend that Rosetta Stone shares be sold?Rosetta Stone: Pricing the 2009 IPO
From our DCF calculations, the value of Torrington as a stand-alone entity is $1.181 billion. However, the maximum purchase price for Torrington should only be $641 million. The optimum debt amount for this transaction would be $301 million. This amount of debt would result in a total debt to capital ratio for Torrington of 47%, within the range for a BBB “investment grade” debt rating. The combined entities, Torrington-Timken, would produce an interest coverage ratio of 3.2, and a debt ratio of 45%, again within the range for a BBB “debt rating. The purchase would likely be a cash transaction.
Art Marks should vote to make an investment in Telco Exchange because the company possesses many of the components which could make it a potential 67 million dollar company (from our valuation by DCF method using WACC -Appendix A). Telco has a product that solves large company high cost issues revolving around telecom equipment and telecom services (makes around $250,000 per software licensing deal). They have been profitable in 2002 and the potential to have a revenue of a 50 million annual revenue in four years time. They have
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.
Karen Daniels , president of Borders Hotel Corporation (BHC) , has to investigate three financing alternatives in order to evaluate their impacts on viability of the BHC
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.
It is important to note the large discrepancy in AMG’s and Forsythe’s estimates of the book value of hardware. Based on Forsythe’s 10.1% equity insertion rate, they are estimating the salvage value to be $87.10/unit, versus AMG’s $150 estimate. It is possible Forsythe has inflated this estimate to increase the lease payments, that AMG is overestimating the value, or a combination of both. If we calculate the NPV of the 24 month buying option by using Forsythe’s equity insertion rate as the salvage value, there is an NPV of $(5,217,043), making this option even less attractive.
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.