the business world would be the characters from Barbarians at the Gate‚ Henry Kravis of Kohlberg Kravis Roberts & Co. and Ross Johnson of RJR Nabisco. Henry Kravis proposed a more conventional but effective manner of conducting business in his years with Kohlberg Kravis Roberts & Co. On the contrary‚ Ross Johnson enforced his own eccentric styling in RJR Nabisco while conducting business‚ one that was not common‚ let alone favored by many. Although these two tycoons had opposite approaches in the
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Case Analysis on RJR Nabisco Towards a course in Finance – FIN 620: Financial Administration Policies Submitted by Benjamin T. Schultz‚ Gail Olsen & Raj K Bhutani To Dr. Susan E. Moeller Eastern Michigan University‚ Ypsilanti‚ Michigan Table of Contents I Problem Statement 3 II Analysis of Economic and Industry Data 3 II.1 What is LBO? 3 II.2 RJR and Smoking 3 III Analysis of Alternative Solutions 4 III.1 Strengths of KKR: 4 III.2 Weaknesses of KKR 5
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RJR Nabisco Valuation When assessing the valuation of RJR Nabisco bids‚ the Special committee should utilize the Capital Cash Flow method. The Capital Cash Flow method‚ when applied appropriately‚ should yield the same valuation when discounting a company’s Free Cash Flow. To get Capital Cash Flows (CCF)‚ Net Income is adjusted by adding back non-cash expenses and other reconciliations to form cash flow‚ decreasing Capital Expenditures‚ decreasing changes in Net Working Capital and finally‚ adding
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board and gained more influence that Weigl Eventually gained control over the company His lavish spending etc.‚ produced mediocre business results 1981--Nabisco proposed a merger of two companies--1.9 billion deal Everyone thought Nabisco would be in charge (over Johnson) Johnson used his "political talent" to win over the Nabisco chairman Johnson eventually took over the company 1985--another call from RJ Reynolds company (tobacco) Soon merger transpired; 4.9 billion Johnson
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and feedback of ValueJam as a basis for new set of corporate values * Palisimo was a true-blue IBMer who started as a salesman‚ he was deeply invested and passionate about the company’s success * Gerstner was an outsider‚ a former CEO of RJR Nabisco and an ex McKinsey consultant * To prove these new values were more than just window dressing Palmisano made changes immediately * He called the director of a major business unit‚ e business and charged her with identifying gaps between
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1. What is the total value of RJR Nabisco under (a) the pre-bid operating strategy? (b) the Management Group’s operating strategy? (c) KKR’s operating strategy? Approach We used the APV approach to value the company under each of the three scenarios. To do so‚ we needed to find the free cash flow‚ debt tax shield‚ and the discount rate‚ which is ra. This rate should be applicable across all three scenarios‚ because it is not dependent on the operations of the company. We then needed to value
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GAINESBORO MACHINE TOOLS CORPORATION CASE STUDY STUDY QUESTIONS FOR THURSDAY 21 AUGUST 2014 This is a fictious case based on real world situations. Although the primary focus is the dividend policy decision the situation of the company has been influenced by its corporate strategy and this case offers the opportunity to also consider the behavioural‚ management‚ and general business issues. The case questions are: As a background to the dividend policy decision briefly evaluate the corporate
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Harvard Business School 9-290-021 Rev. August 7‚ 1995 RJR Nabisco - 1990 In the spring of 1990‚ the firm of Kohlberg Kravis Roberts & Co. (KKR) was in negotiation with lenders regarding the refinancing of a $1.2 billion bridge loan due to be repaid in full by February‚ 1991. The bridge loan was part of the $24 billion financing of KKR’s leveraged buyout of RJR Nabisco in early 1989. Originally‚ KKR had planned to retire the loan with the proceeds of a $1.25 billion public offering of
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| ADVANTAGES | DISADVANTAGES | APV | | | Approach is to analyze financial maneuvers separately and then add their value to that of the business. | APV always works when WACC does‚ and sometimes when WACC doesn’t‚ because it requires fewer restrictive assumptions | Some limitations amount to technicalities‚ which are much more interesting to academics than to managers. | | Less Prone to serious errors than WACC. | Income from stocks- as opposed to bonds- may be taxed differently when the
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9 billion acquisition of Nabisco Brands Inc. To finance the acquisition‚ RJR was proposing the issue of $1.2 billion of 12 year notes and the same amount in preferred stock. It had already funded $1.5 billion of the acquisition leaving $1 billion more to finance. Challenges facing RJR: Of the $1.5 billion that had been funded‚ $500 million came from cash and the remaining was through bank borrowings and commercial paper. These borrowings added to the debt that RJR had issued in 1984 and brought
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