Euro takeover
Euro Takeover 2005
A six‐party simulation of takeover contests
Case Structure
• Six teams
Role
Company Name
Case Number
Target
HoogenFood N.V.
UVA-F1497
Raider
Finance Mondiale S.A.
UVA-F1498
LBO Sponsor
Lanza E Compagnia
UVA-F1499
White Knight
Alimentos Globales
UVA-F1500
Bank
Omni Bank PLC
UVA-F1501
Bank
Euroland Bank A.G.
UVA-F1502
Case Structure
Euroland Bank
Omni Bank
Financing
Of E2.5b
Financing
Of E2.5b
LBO
Raider
Tender offer E70/shr
Owns 8.3%
has E6b capital
???
Target
Food Div. Chemical Div.
Operates company
Owns 10%
Target management
Own 60%+ shrs
Arbitrageurs
Potential Synergy
Friends, CEOs sit on each others’ boards
White Knight
1
Case Schedule
• Week 7
– Team Meeting
– Valuation
• Week 8
– Valuation report due before negotiation
Valuation report due before negotiation
– Negotiation between teams
• Week 9
– Case report due
– Teams presentation
– Discussion
Valuation
• Target
– What is your reservation price, i.e. lowest price willing to accept?
• Bidders (Raider, LBO, W.K.)
(
,
,
)
– What is your walkway price, i.e. highest price willing to pay?
• Banks
– Credit rating, interest rate
– Lending limit & Structure
Credit Analysis
• Evaluate post‐merger credit worthiness
– Statutory vs. subsidiary merger
– Post merger cash flow
• How much synergy to include?
How much synergy to include?
– Post merger debt level
2
Capital Structure
• Senior Debt
–
–
–
–
Term loans & Revolving credit
Collateralized with assets
On Bank’s book
No more than certain % of total amount (typically 60%)
No more than certain % of total amount (typically 60%)
• Mezzanine or subordinate debt
– Uncollateralized
– Higher interest
– Often sold to bond investors, Banks off the hook
• Equity
– Investment from bidder
Statutory vs. subsidiary merger
• In a statutory merger
•
A six‐party simulation of takeover contests
Case Structure
• Six teams
Role
Company Name
Case Number
Target
HoogenFood N.V.
UVA-F1497
Raider
Finance Mondiale S.A.
UVA-F1498
LBO Sponsor
Lanza E Compagnia
UVA-F1499
White Knight
Alimentos Globales
UVA-F1500
Bank
Omni Bank PLC
UVA-F1501
Bank
Euroland Bank A.G.
UVA-F1502
Case Structure
Euroland Bank
Omni Bank
Financing
Of E2.5b
Financing
Of E2.5b
LBO
Raider
Tender offer E70/shr
Owns 8.3%
has E6b capital
???
Target
Food Div. Chemical Div.
Operates company
Owns 10%
Target management
Own 60%+ shrs
Arbitrageurs
Potential Synergy
Friends, CEOs sit on each others’ boards
White Knight
1
Case Schedule
• Week 7
– Team Meeting
– Valuation
• Week 8
– Valuation report due before negotiation
Valuation report due before negotiation
– Negotiation between teams
• Week 9
– Case report due
– Teams presentation
– Discussion
Valuation
• Target
– What is your reservation price, i.e. lowest price willing to accept?
• Bidders (Raider, LBO, W.K.)
(
,
,
)
– What is your walkway price, i.e. highest price willing to pay?
• Banks
– Credit rating, interest rate
– Lending limit & Structure
Credit Analysis
• Evaluate post‐merger credit worthiness
– Statutory vs. subsidiary merger
– Post merger cash flow
• How much synergy to include?
How much synergy to include?
– Post merger debt level
2
Capital Structure
• Senior Debt
–
–
–
–
Term loans & Revolving credit
Collateralized with assets
On Bank’s book
No more than certain % of total amount (typically 60%)
No more than certain % of total amount (typically 60%)
• Mezzanine or subordinate debt
– Uncollateralized
– Higher interest
– Often sold to bond investors, Banks off the hook
• Equity
– Investment from bidder
Statutory vs. subsidiary merger
• In a statutory merger
•