The Timken Company is one of the worldwide leaders in the bearing industry with operations spanning over the past 100 years. Timken has recently been experiencing sluggish earnings, forcing a consolidation of their workforce and a cut in their dividend payout. Timken has been in contact with Ingersoll-Rand, a globally diversified manufacturer of commercial and industrial equipment and components, with the potential to acquire one of their subsidiaries that specializes in the bearing industry, Torrington Company. The U.S. bearing industry has been experiencing a variety of problems recently, including pressure from foreign competitors that are able to offer products with similar quality at lower prices. The bearing market has hit its peak, and now Timken has found a way to edge out the foreign competition, through customization of their products to match customer needs. For Timken to be able to achieve their goals, they’ve identified Torrington Company as a perfect match to help them accelerate past foreign competition and grow their business sustainably. To estimate the price Timken should offer to IR, we used a variety of different methods, including the discounted cash flow method of Torrington, and an industry earnings multiple method. Based on our analysis, we believe it is best for Timken to offer a total of $893.46M to Ingersoll-Rand for Torrington, the majority being cash raised through a debt issuance, and the rest an agreed upon equity stake in Timken. The details and analysis are explained in the memo as follows.
The potential benefits of the Torrington acquisition for Timken are unquantifiable. The automotive industry has been fairly volatile recently, and a concern to management. Torrington offers a strong potential ...
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... in new debt and $400M in equity through a rights offering. By doing this, Timken can raise $800M in cash to offer Ingersoll-Rand. The increase in debt allows Timken to maintain acceptable coverage ratio’s within the BBB investment rating [Exhibit 6 & 7]. To minimize Ingersoll-Rand’s exposure to our stock price volatility, we recommend the remaining 93.46M of the deal be a stock-for-stock deal or 4.92Million shares at the current price of $19 a share. A risk with this is that historically with acquisitions, the acquiring firm’s stock price declines. If the market can realize the growth potential of the acquisition and how much it can benefit Timken, then their stock price should appreciate. Ingersoll-Rand should be inclined to accept because the majority is in a cash offer, and once they do, Timken shareholders stand to reap enormous benefits with the acquisition.
UST Inc. is a dominant player in the smokeless tobacco industry. We have been tasked with weighing the cost and benefits of having leverage in their capital structure and to advise the CEO whether or not to go ahead with the recapitalization. After solving for UST’s credit ratings and value given three different stock buyback scenarios, $700 million, $1 billion, and $1.5 billion, we would suggest that UST move forward with the recap at $1 billion.
Grand Metropolitan PLC is the world’s largest wine and spirits seller. It mainly operated in London, USA. In 1991, it beats market expectation with a 4.8% increase in pretax profits, and the company Chairman stated that company’s goal “to constantly improve on”. Despite the great performance in the world recession in 1991, the price of GrandMet shares was 10% below the average price/earnings ratio of the companies in the Standard & Poor’s 500 index. And more important, rumors had that GrandMet, valued at more than $14 billion in the stock market, maybe a takeover target. The management dilemma is to understand why the company’s stock is traded below of what considered being the right price and whether the company is truly being undervalued by the market or there are consistent issues with negative NPV projects and lines of businesses.
Robert Zimmerman, the senior vice president of business development, for American Cable Communications (ACC) was in the process of looking for a potential acquisition target for ACC. In December 2007, Zimmerman remember a presentation that was made recently by Rubinstein & Ross (R&R). R&R was a boutique investment bank that was well known for doing deals in the media and telecommunications area. During this presentation it was suggested that ACC buy out AirThread Connections (AirThread) which is a large regional cellular provider. The current industry of these companies were moving more toward bundled service offerings and by adding AirThread it would help ACC cover an area of service it does not currently offer. In order to determine if the acquisition should be done an analysis needs to be done.
Chang, S. Suk, D. Failed takeovers, methods of payment, and bidder returns, Financial Review. 33 (2), May 1998.
Since the company was slow in both innovation and growth, it was time to make a life-changing decision for the company. Atul insisted on keeping the culture of debt-free and not accepting any external capital (for the past 15 years), however, the company was not doing great during that time. The case described that TEOCO primarily focused on North America telecom carriers, because of globalization, the company needed to expand its business worldwide. Therefore, TA Associates was the right choice for TEOCO in favor of equity investment. Partnering with TA Associates will help to strengthen TEOCO’s current financial condition as well as provide a strong support for the global network of relationships, according to Calo et al. (n.d.).
This analysis will identify the current value of the company at a stand-alone value and explain why Nestle Food would want to buy this company and the synergies involved for their reasoning. We will also discuss who will benefit if Reynolds Metals were to sell to Nestle or were to create an IPO. Finally we will provide a recommendation for Reynolds Metals that will be most beneficial to the company financial needs.
In 1999, the Nissan was suffering under a decade of decline and unprofitability, in fact the company was on the verge of bankruptcy, with continuous loses for the past eight years resulting in debts of approx. $22 billion. Elements impacting Nissan’s performance prior to the global alliance with Renault
Hammond Cards, Inc. is a small player of the greeting cards industry in the United States of America due to the fact that their annual revenues equate to less than 1% of the industry leaders as described in the case. In their effort to stimulate growth, however, Wendy Hammond has employed me to analyze the potential acquisition of another company, Creative Designs. My analysis will firstly look at the main issue behind this acquisition and then further break it down into sub-issues that I will address individually. Since both of these companies follow a different strategy I will evaluate the two different companies and discuss the implications of their strategies on the merger. I will then perform various cost analysis to determine the cost structures of the two firms which will help me identify whether Wendy’s intentions can be carried out. In my analysis I will aim to figure out the practical capacity of the firms and get an indication on whether their current operations are using the optimal level of capacity and minimizing waste. This data will help me with my strategic recommendation of acquiring Creative Designs and fitting it in with the current strategy of Hammond C...
...rs, setting a good trend for the corporation. They also have a very low debt-to-equity ratio, indicating that they have enough equity to easily pay off any funds acquired from creditors. As a creditor I would feel safe in lending them funds for any future projects or endeavors.
Thirdly, serial borrowing and repurchase throughout several years is considered. This is essentially the financial policy the company has adopted these years. This policy is less risky measured by coverage ratios and is more acceptable to stockholders. However, UST has imminent challenges and value enhancing objectives to meet. If the company has debt capacity untapped upon, large sum repurchases avoid excessive advisory fee, negotiation time and effort, potentially credit rating charge while immediate significant tax shield benefit is made possible.
Star Appliance is looking to expand their product line and is considering three different projects: dishwashers, garbage disposals, and trash compactors. We want to determine which project would be worth doing by determining if they will add value to Star. Thus, the project(s) that will add the most value to Star Appliance will be worth pursuing. The current hurdle rate of 10% should be re-evaluated by finding the weighted average cost of capital (WACC). Then by forecasting the cash flows of each project and discounting them by the WACC to find the net present value, or by solving for the internal rate of return, we should be able to see which projects Star should undertake.
Generally speaking, the change in stock prices on the day of the acquisition announcement means that the market approves or disapproves the acquisition. As the market value of Berkshire 's company went up, it demonstrates the market approval of it and created value of $2.55 billion for both buyers and sellers.
In “Venture Capital” alternative, a sum of $3.5 million will be traded in exchange for 750,000 shares and 50% of the board seats, which will result in a weighted average outstanding shares of 1,375,000. Net income will come to $514,500 and EPS will be 0.29.
This report identifies Jaguar Land Rover Automotive Ltd. (JLR) and its strategy as a global. After recording losses for many consecutive years, it has seen a huge improvement in general performance since acquisition by Tata Group of India, recently taking a profit in excess of £1.5bn in FY’12 (1).
Since the completion of the merger, Daimler Chrysler stock (DCX) has suffered over a 55% decline. The fundamentals of the company trail i...