Seagate Technology Buyout
VALUATION -PROBLEM SOLVING FOR THE CASE STUDY
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Question 1
Potential value creation in the transitions:
1. Use of a risk hedging financial contract, the swap.
2. Acquisition of an undervalued target.
3. Evading tax liability.
The management under the advisory of analyst believe that the company requires to make intensive, heavy investments which is not feasible if the Seagate Inc. remains a public company
The other capital reorganisations alternatives are involving significant tax liability and considering the present nature of events that Seagate is a public Company, the tax liability will result to loss of the wealth of the shareholders where the capital restructuring option involves corporate taxes as well as personal tax liability.
The stock of Seagate Inc., experience an adverse value gap, Such that the market value of the corporation is significantly lower than the asset value. The management have considered a number of options to restate the stock price to represent the fair value of the group. These includes divestment, discontinue and other capital restructuring which resulted to the eventual swap with VERITAS ltd stock for Network and Storage Management Group.
The management of a publically listed company have a fiduciary duty to protect the wealth of shareholders, as well as ensure a fair offer tendering. Thereby, the management has narrowed down to opt this two staged transaction.
The expected cash flows of the Seagate were stable and established, this makes leverage buying possible, since the borrower is well credit rated, cash flows are steady and the interest rate offered is financially reasonable.
Question 2
Stakeholders interest to the reconstruction deal:
All parties to the deal are considered to be winners if it is a consented out of free will. However, parties to the deal to do not win equally.
Seagate shareholders:
The shareholders of Seagate received a 25% increase in the stock market value on
Name
Institution
Instructor
Course
Date
Question 1
Potential value creation in the transitions:
1. Use of a risk hedging financial contract, the swap.
2. Acquisition of an undervalued target.
3. Evading tax liability.
The management under the advisory of analyst believe that the company requires to make intensive, heavy investments which is not feasible if the Seagate Inc. remains a public company
The other capital reorganisations alternatives are involving significant tax liability and considering the present nature of events that Seagate is a public Company, the tax liability will result to loss of the wealth of the shareholders where the capital restructuring option involves corporate taxes as well as personal tax liability.
The stock of Seagate Inc., experience an adverse value gap, Such that the market value of the corporation is significantly lower than the asset value. The management have considered a number of options to restate the stock price to represent the fair value of the group. These includes divestment, discontinue and other capital restructuring which resulted to the eventual swap with VERITAS ltd stock for Network and Storage Management Group.
The management of a publically listed company have a fiduciary duty to protect the wealth of shareholders, as well as ensure a fair offer tendering. Thereby, the management has narrowed down to opt this two staged transaction.
The expected cash flows of the Seagate were stable and established, this makes leverage buying possible, since the borrower is well credit rated, cash flows are steady and the interest rate offered is financially reasonable.
Question 2
Stakeholders interest to the reconstruction deal:
All parties to the deal are considered to be winners if it is a consented out of free will. However, parties to the deal to do not win equally.
Seagate shareholders:
The shareholders of Seagate received a 25% increase in the stock market value on