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There has been a rumor that Company Z may become a takeover target for another company in the industry, or even for a private equity
There has been a rumor that Company Z may become a takeover target for another company in the industry, or even for a private equity fund in a leveraged buy-out (LBO). Here is the updated data on Company Z:
| Current Capitalization (Millions of EUR) | |
| Currency | Million EUR |
| Shares Price | $ 250.0 |
| Shares Outstanding | 221.0 |
| Market Capitalization | 55,250.0 |
| - Cash & Short Term Investments | 5,125.0 |
| + Total Debt | 55,625.0 |
| + Pref. Equity | - |
| + Total Minority Interest | - |
| =Total Enterprise Value (TEV) | 105,750.0 |
| Book Value of Common Equity | 13,213.0 |
| + Pref. Equity | - |
| + Total Minority Interest | - |
| + Total Debt | 55,625.0 |
| Total book capital | 68,838.0 |
| a) Given the data above, what is your guess for the value of the offer that an acquirer would have to make in order to buy Company Z | ||||
| Offer = | Million Euros | |||
| b) Discuss the following statement: "This company is not a great candidate for an LBO, because its leverage ratio is already relatively high." | ||||
| c) Discuss the following statement: "The potential acquirer will increase the amount of debt in its books by more than 100,000." | ||||
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