Hansson Private Label

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Advanced Corporate Finance Case: Hansson Private Label Group members: Priyanka Kushwaha, Joshua Downs, Diego Martin, Bobur Rasulov Q1. HPL, started in 1992, is manufacturer of private label personal care products. Tucker Hanssen bought the company for $42 million to capitalize on the powerful trend of increasing share of private labels in consumer-products sales. The company since then grew steadily to generate revenues of $680.7 million in 2007. HPL now had four plants, all operating at more than 90% of capacity. In February 2008, the company was mulling over a proposal to invest in a $50 million project to expand the production capacity of the company in order to cater to their largest retail customer. HPL accounted for 28% of the total $2.6 billion wholesale sales of personal care products from manufacturers in 2007. Within the industry, HPL now counted most major national and regional retailers as its customers. The $50 million project, although would double the company’s debt, but would also greatly increase its customer concentration. Q2. HPL had not initiated a project of such ($50 million) magnitude in over a decade. The expansion of the business will have a significant impact in the company. We can consider three metrics to analyze it: long-term debt, revenue and book value. More than double the company’s long-term debt. The new expansion debt of $57.8 million (at 7.75% per annum) would add to the existing long-term debt. According to the revenue of the current operations and the revenue that the expansion will provide to the company, the new investment will increase the revenue by 21%. Similarly, the new investment will increase the book value of Hansson by up to 15%. | Long term debt | Revenue | Book value | Current operations 2007 | 54.8 | 680.7 | 380.8 | New investment 2009 | 58 | 144 | 58 | Difference | 105.51% | 21.13%

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