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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 | $ 47.0 | |||||
Shares Outstanding | 357.0 | |||||
Market Capitalization | 16,779.0 | |||||
- Cash & Short Term Investments | 1,125.0 | |||||
+ Total Debt | 4,287.0 | |||||
+ Pref. Equity | - | |||||
+ Total Minority Interest | - | |||||
=Total Enterprise Value (TEV) | 19,941.0 | |||||
Book Value of Common Equity | 1,357.0 | |||||
+ Pref. Equity | - | |||||
+ Total Minority Interest | - | |||||
+ Total Debt | 4,287.0 | |||||
Total book capital | 5,644.0 | |||||
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? SHOW CALCULATIONS | ||||||
Offer = | Million Euros | |||||
b) Discuss the following statement: this company is not a great candidate for an LBO, because its book leverage ratio is very high. |
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