Interco
Interco Case Study
Interco’s Business
Interco was comprised of four major divisions: Apparel, General Retail, Footwear, and Furniture and Home Furnishings. Each operating division had multiple independent companies that designed, manufactured, and distributed their products. The apparel group included eleven different companies whose products included private-label sportswear, casual apparel, and a number of other apparel items. The general retail operation had 201 locations in fifteen states. They sold from home improvement centers, discount stores, men’s specialty apparel shops, and specialty department stores. The footwear division had two major brands, Converse and Florsheim. The group’s operations spread internationally, with distribution reaching Canada, Mexico, and Australia. The furniture division, whose sales accounted for a third of the Interco sales, included brands like Broyhill, Lane, and Hickory Chair. The furniture group of Interco was the largest furniture manufacturer in the world in 1988.
Overall sales and net income for fiscal year 1988 increased from their 1987 figures. In August of 1988, a merger proposal from City Capital offered $70 per share. On August 8, 1988, the board of directors met to discuss a restructuring plan that included selling the apparel group, paying a dividend, and/or repurchasing common stock. However, the proposal from City Capital required an evaluation of the takeover bid. Board members approved a “golden parachute” severance package for Interco’s senior executives, in the event of an acquisition from a third party. The financial advisor to Interco, Wasserstein Perella, prepared a valuation of the company, which resulted in a valuation range of $68-80 per share.
Interco’s Goals
As of August 1988, Interco had goals to improve the return on shareholders’ investment, to further deter a third party acquisition, and to narrow the focus of business to improve share price. In order to accomplish these goals, Interco
Interco’s Business
Interco was comprised of four major divisions: Apparel, General Retail, Footwear, and Furniture and Home Furnishings. Each operating division had multiple independent companies that designed, manufactured, and distributed their products. The apparel group included eleven different companies whose products included private-label sportswear, casual apparel, and a number of other apparel items. The general retail operation had 201 locations in fifteen states. They sold from home improvement centers, discount stores, men’s specialty apparel shops, and specialty department stores. The footwear division had two major brands, Converse and Florsheim. The group’s operations spread internationally, with distribution reaching Canada, Mexico, and Australia. The furniture division, whose sales accounted for a third of the Interco sales, included brands like Broyhill, Lane, and Hickory Chair. The furniture group of Interco was the largest furniture manufacturer in the world in 1988.
Overall sales and net income for fiscal year 1988 increased from their 1987 figures. In August of 1988, a merger proposal from City Capital offered $70 per share. On August 8, 1988, the board of directors met to discuss a restructuring plan that included selling the apparel group, paying a dividend, and/or repurchasing common stock. However, the proposal from City Capital required an evaluation of the takeover bid. Board members approved a “golden parachute” severance package for Interco’s senior executives, in the event of an acquisition from a third party. The financial advisor to Interco, Wasserstein Perella, prepared a valuation of the company, which resulted in a valuation range of $68-80 per share.
Interco’s Goals
As of August 1988, Interco had goals to improve the return on shareholders’ investment, to further deter a third party acquisition, and to narrow the focus of business to improve share price. In order to accomplish these goals, Interco