The railroad industry is a mature market. The best option for growth is through mergers and acquisitions. By merging with Conrail, CSX would claim almost 70% of the Eastern market. By combining the rail networks CSX-Conrail would be able to offer long-haul routes between the Southern, Northeast, and Midwest ports. The combined entity would be able to consolidate overlapping operations which would reduce costs by an estimated $370 million by 2000. The cost savings would also be passed onto customers using the shorter routes between the Midwest and the South. By offering more competitive pricing an additional $180 million in operating income is expected through revenue increases. Part of this additional revenue is expected to be taken from Norfolk Southern. Mechanics and rationale of the two-tiered offer: Pennsylvania's Corporate Laws have very stringent antitakeover statutes. In order to get around some of these statutes the deal has been split into a two-tiered offer. First CSX will pay $92.50 per share in cash for the first 40% of the acquisition shares. This front-end offer will be separated into two stages. The first …show more content…
The average offer price per share as a multiple of EPS for recent railroad acquisitions is 17.22 times. If we multiply that by Conrail's expected EPS for 1997 of $5.69 we get an offer price per share of $97.98. This is substantially higher than the front-end cash offer from CSX of $92.50. We also looked at enterprise value as a multiple of EBITDA. The average for recent railroad acquisitions is and enterprise value of 10.58 times EBITDA. Conrail's EBITDA for the last four quarters is $1,017 million. This calculation gives us an enterprise value of $10,760 million. We calculated the two-tiered offer to be $8,185 million from CSX in Appendix 3. This is significantly lower than the estimated enterprise value calculated based on
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.
The second section will be a report to the board of directors that identifies a synergistic acquisition candidate for Target. This section will identify Target's proposed acquisition terms, price, financing, and potential negotiation strategies. This segment will also include price / earnings ratios, book value, current market value, and liquidation based on the supporting financial data. Also in this part will be a discussion of the general and specific risks inherent in an acquisition strategy.
Earlier 2002, the stock price of Agnico-Eagle Mines sharply decreased by $1 finally closed at $13.89. This price has reached one of the lowest level, from the company's historical perspective. As a professional equity portfolio manager, who has a large number of AEM stocks on hand. Acker and his team are necessary to find a proper way to estimated the fair value of AEM as well as its equity. Discounted Cash Flow (DCF) has been chosen to do this job. The theory behind DCF valuation approach is that the firm's value can be estimated by using the expected future free cash flow discounted by an appropriate discounted rate (Koller etc 2005). However several assumptions need to be clearly examined within this approach. The following sections are showing the process of DCF step by step.
...d the cost of equity I made a sensitivity analysis chart for Cisco through which I came up with the target price of $32.50. This chart shows the different price ranges of the stock which could be possible if the Terminal Value Perpetuity Growth Rate went higher or lower compared to the Cost of Equity.
In conclusion, for Amtrak to increase its profits and build its brand, it needs effective communications and cost management strategies, deliver high-quality cost effective product/services and improve the workforce with training and development. The new strategy might be expensive in the beginning, but profitable in long run, as it would increase their customer base and market value
The purpose of this report is to analyze Target Corporation’s financial statements, determine the future growth potential of the company, and make a recommendation for or against the acquisition of the company.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Despite the growth in the market, Qantas International’s market share has been falling over the past 10years, from 34% in FY02 to 16% in FY13. The entry of Virgin Australia in 2000 in part explains this, however Virgin’s growth also coincided with the demise of Ansett in 2001 “… Virgin Blue will initially increase capacity on existing routes while evaluating what c...
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 vote deciding the fate of the poison pill provisions which need to be removed to make the deal necessary.
The final model used to compute the cost of capital was the earning capitalization model. The problem with this model is that it does not take into consideration the growth of the company. Therefore we chose to reject this calculation. The earnings capitalization model calculations were found this way:
What is the possible meaning of the change in stock prices for Berkshire Hathaway and Scottish Power plc on the day of acquisition announcement? Specifically, what does the $2.55 billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp?
At $36.00 (cash) per share, it is $4.00 higher than Meadowbrook Lane’s offer of $32 (cash) per share. With Ben & Jerry’s current stock price at $21.00, the $36.00 offer would result in a $15.00 gain on each share, for the shareholders. Looking at the market capitalization of Ben & Jerry’s and Unilever, shows a stark contrast in company size (see Market Cap. Excel). Ben & Jerry’s market capitalization is valued at $158,801,769 or .88% of Unilever’s $18 billion market capitalization, which is the largest of any of the offering
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.
Lastly, the stock price and earnings per share. share will increase to $3.87 in comparison to an equity-financed. acquisition of $2.72 per share. CCI would be taking a somewhat high. risk by issuing additional stock due to the uncertainty about the offering a price for the product.
Horizontal mergers are likely to create value for shareholders because they combine firms in the same industry, thus the opportunity for synergies is very high. As competition decreases, market share and pricing power increase. Horizontal mergers often create economies of scale, allowing companies to offer the same product at a lower production cost.