Kohler Co - M&a
Group Assignment on“Kohler (A) M&A Valuation”Submitted toINSTRUCTOR: ___________________In partial fulfillment for requirements of the courseMergers and Acquisitions (2012-2013)ByGroup K On19 November 2012 |
Contents EXECUTIVE SUMMARY 3 Why does Herbert Kohler wants to do the recap 4 Calculation of Enterprise value 4 Using Discounted cash flow method 4 Dividend Growth Model 7 Comparable Companies Analysis 8 Valuation Summary 9 Justifying the share price of $ 55,400 10 Defending $270,000 as share value 10 Final advice to Herbert Kohler 10
EXECUTIVE SUMMARY
In May 1998, Kohler Co. offered a recapitalization plan to buy-out minority shareholders and hence become a 100% family owned business. But the offered price of $55,400 was contested by the dissenting shareholders who considered the share price to be around $2,70,000. For Kohler, the court determined share price would have severe economic consequence besides raising the cost of recapitalization. Kohler Company was faced with a very tough decision of whether or not to settle outside of court or go to court to settle with the dissenting shareholders.
As per the valuation exercise presented herewith, the average enterprise value of Kohler comes to $1,715 MM which translates to a per share price of $230,291. The valuation has been carried out using different methodologies such as Discounted Cash Flow, Dividend Growth Model and Comparable Company Analysis. The Enterprise Value of $1,715 MM is the average of values obtained through these methods.
Based on the valuation exercise, it is quite likely that if the court was to determine the fair value of the shares, the same would be substantially high and may also lead the price to be determined close to what dissenters are asking for. In such a situation, to avoid the implications which a court determined prices would have, Herbert Kohler should pursue an out of court settlement with the plaintiffs.
The price which Kohler should offer should be
Contents EXECUTIVE SUMMARY 3 Why does Herbert Kohler wants to do the recap 4 Calculation of Enterprise value 4 Using Discounted cash flow method 4 Dividend Growth Model 7 Comparable Companies Analysis 8 Valuation Summary 9 Justifying the share price of $ 55,400 10 Defending $270,000 as share value 10 Final advice to Herbert Kohler 10
EXECUTIVE SUMMARY
In May 1998, Kohler Co. offered a recapitalization plan to buy-out minority shareholders and hence become a 100% family owned business. But the offered price of $55,400 was contested by the dissenting shareholders who considered the share price to be around $2,70,000. For Kohler, the court determined share price would have severe economic consequence besides raising the cost of recapitalization. Kohler Company was faced with a very tough decision of whether or not to settle outside of court or go to court to settle with the dissenting shareholders.
As per the valuation exercise presented herewith, the average enterprise value of Kohler comes to $1,715 MM which translates to a per share price of $230,291. The valuation has been carried out using different methodologies such as Discounted Cash Flow, Dividend Growth Model and Comparable Company Analysis. The Enterprise Value of $1,715 MM is the average of values obtained through these methods.
Based on the valuation exercise, it is quite likely that if the court was to determine the fair value of the shares, the same would be substantially high and may also lead the price to be determined close to what dissenters are asking for. In such a situation, to avoid the implications which a court determined prices would have, Herbert Kohler should pursue an out of court settlement with the plaintiffs.
The price which Kohler should offer should be