Case Studies in Derivatives Securities Case#8: Cephalon,Inc Cohort 6 Group 2 Jin Yi Zhang Sisi Ma Yue Yu Haiyang Risk Management or Speculating Cephalon should take SBC’s offer to buy call options on its own stocks. However, this is not an appropriate risk management decision and Cephalon is simply speculating. To manage its stock price risk, Cephalon should at least take measures to avoid the loss brought by DFA disapproving the projection. Since the possibility that DFA will approve the projection is expected to be as high as 70%, Cephalon bets that its profit will be higher. Thus this measure, to buy call options by selling stocks to SBC, is simply speculating.
At present, Bessemer’s shareholders are hoping for a higher dividend and cutting it would only upset these shareholders. This decision would also signal poor cash flows, lowering the firm’s value with the cut. Along with this, the firm could be up for a hostile takeover if large blocks of stock are liquidated at once. However, with a lowered stock price, aggressive growth investors may be willing to pick up the slack, thus increasing the stock price and avoiding any possible takeover. Another option for Bessemer is to change their dividend strategy entirely.
Entrepreneurial Finance and Private Equity CASE 2: Brazos Partners: The CoMark LBO 1.Executive Summary: Brazos Equity, a middle market LBO group founded in 1999, was considering buying 73% share of Comark Building System Inc. at the cost of $40 million. Comark, had $35 million revenue in 2001, is a manufacturer of commercial modular Buildings and has a solid connection with government. Brazos thought Comark as a good deal because Comark had a good management, solid cash flow and was priced reasonably. Brazos was trying to decide a stock purchase or asset purchase. The asset purchase option will generate $700,000 million more tax obligation than stock purchase do.
I increased Advertising for Allround+ at $20 Million and Allright at $19 Million to support their good sales improvement. Promotion budget was increased from $8.5 to $ 9.5 Million for Allroud, from $6.5 to $8.0 with launching of coupons $2.0 Million (matured product) and Allright from $5.7 to $6.25 Million with launching (period of coupons $2.0 Million to stabilize repurchase for matured products. By launching of coupons I started with cheaper coupons ($0.25) and continued with ($0.5) In the Period 10, I reached the highest Retail Sales volume $1,449.6 Million among competitors on the market, the highest Net Income $277.5 Million, the highest Stock Price $211.42 and Capacity Utilization 110.9 % The Allround product reached the highest awareness on the Cold, Cough market (95.1%) and Allright second highest (95.4%) on the allergy market. Allround has the highest (68.6%) satisfaction ratio on the Could, Cough market and Allright the highest (51.5%) on the Allergy
Jones purchase the stock of Smithon outright leaving Smithon intact? The stock should not be purchase by Mr. Jones. Mr. Jones acquiring the assets, liabilities and also would inherit the contractual obligations of the selling corporation, would, be the results of the purchase. In lay terms, he has bought the existing Smithon Corporation and he is responsible of ensuring daily operations run efficiently but the tax aspect of acquisition he is responsible for existing and any future tax liabilities that the selling corporation had. It would be my advice for Mr. Jones to not buy the stock because of the liability of current and future tax obligations which Mr. Jones would incur from the purchase of the stock.
Dick’s Sporting Goods is rapidly growing and achieving things that many people thought would be impossible. This year alone, Dick's Sporting Goods has exceeded expectations with its third-quarter results and they have also pleased their shareholders with its plans to start paying dividends. Dick’s Sporting Goods now operates more than 450 shops across 42 states, along with 81 Golf Galaxy stores in 30 states and they do not plan to stop here. Dick's third-quarter net sales rose by 9.3% from the year-earlier, to almost $1.2 billion, with the help of additional sales from 19 newly opened stores. The company's gross margins went up by 126 basis points, to 29.7%, mainly because of better inventory management and a change in the product mix and selling and administration expenses range in at $274.4 million.
RSC wants to make sure they get paid in the event of a sale or liquidation of the company. The PCPT feature was deemed necessary by RSC because management of Metapath could sell the company at a small step up from the current round of financing with significant profits, leaving RSC with little more than they put in. How would RSC’s participating preferred interact with the other tranches of preferred stock? Tranches C& D would receive less because of the liquidity preference for PCPT in the event of a sale. Tranches A & B would receive their money back.
They are losing market shares to securities firms that are not so strictly regulated and to foreign financial institutions operating without much restriction from the Act. 2. Conflicts of interest can be prevented by enforcing legislation against them and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms. 3. The securities activities that depository institutions are seeking are both low-risk, by their very nature, and would reduce the total risk of organizations offering them, by
“The most important provision of this act however is the prevention of anticompetitive mergers. This occurs when a company buys a competing firm. While most mergers allow the companies to create better quality goods at less expensive prices, some mergers limit competition and make price fixing easier. This part of the act was designed to prevent mergers from creating monopolies” (Ellsworth, 4). This section of the Clayton act wanted to promote free trade and keep smaller businesses from getting too greedy.
1. Evaluate the wisdom of Tambrands becoming part of Procter & Gamble. Tambrand’s wisdom of becoming a part of Procter and Gamble (P&G), was a very smart and calculated occurrence. Tambrands only product, the Tampon Tampax was best selling Tampon in the world beating mega firms like P&G in its initial year capturing 44% of the Global market share conducting 90% of its sales in North American and Europe. Tambrands desire to expand globally was essential because of market saturation and competition in the current market.