...Introduction Victor Dubinski, CEO of Blaine Kitchenware, Inc. had recently been made aware that a group of private equity investors made inquiries about a possible acquisition of Blaine. Dubinski knew that the family had absolutely no interest in selling, but he was still perplexed about how the private equity group could unlock some inherent value within their company. They wanted to use the cash on Blaine’s balance sheet and new borrowings to purchase all of Blaine’s outstanding shares at a price higher than its current stock price. After some thinking, he began to think about how he could complete a repurchase decision himself and thus stave off an unsolicited takeover. Blaine Kitchenware is a mid-sized producer of branded small appliances primarily used in residential kitchens. It was originally founded in 1927 as the Blaine Apparatus Company and produced then-novel electric home appliances. By the year 2006, Blaine had achieved a 10% share of the total $2.3 billion U.S. market for small kitchen appliances. Recently Blaine began expanding into foreign markets. A majority of their revenue was generated from shipments to U.S. wholesalers and retailers, but 35% of their sales came from Canada, Europe, Central, and South America. By the end of 2006, Blaine’s balance sheet was the strongest in the industry. They were debt-free and held $231 million in cash and securities. More recently, the company’s largest uses of cash had been dividends paid out to their shareholders...
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...UNIVERSIDADE ESTÁCIO DE SÁ MBA EM GESTÃO FINANCEIRA E CONTROLADORIA Fichamento de Estudo de Caso Lidiane Regina Nogueira das Neves Trabalho da disciplina Fundamentos da Matemática Financeira e Estatística Aplicada Prof. Geraldo Gurgel Filho Itaituba – PA 2015 Estudo de caso: Blaine Kitchenware Inc.: estrutura de capital FUNDAMENTOS DA MATEMÁTICA FINANCEIRA E ESTATÍSTICA APLICADA Blaine Kitchenware Inc. REFERÊNCIA: LUEHRMAN, T. & HEILPRIN, J. Blaine Kitchenware Inc.: estrutura de capital. Boston, MA: Harvard Business School, caso LACC # 413-P02, 8 de Outubro de 2009. Os autores descrevem a atividade da empresa de capital aberto Blaine Kitchenware Inc. e em seguida fazem uma análise do seu desempenho financeiro e políticas financeiras. A BKI é uma empresa de médio porte, fabricante de eletrodomésticos para cozinhas residenciais, cuja “maioria das ações pertencia a descendentes dos fundadores da empresa, assim como a diversos trusts da própria família” (p.1). A Blaine tinha pouco menos de 10% do mercado e o setor cresceu apenas 3,5% anuais de 2003 a 2006 devido a concorrência com importados e preços agressivos dos hipermercados. Esta atuava em três segmentos: utensílios para preparo de comida, para cozinhar e para o preparo de bebidas, sendo os dois primeiros os de maior geração de receita. A empresa introduziu no mercado produtos com tecnologia “smart”...
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...4040 OCTOBER 08, 2009 TIMOTHY LUEHRMAN JOEL HEILPRIN Blaine Kitchenware, Inc.: Capital Structure On April 27, 2007, Victor Dubinski, CEO of Blaine Kitchenware, Inc. (BKI), sat in his office reflecting on a meeting he had had with an investment banker earlier in the week. The banker, whom Dubinski had known for years, asked for the meeting after a group of private equity investors made discreet inquiries about a possible acquisition of Blaine. Although Blaine was a public company, a majority of its shares were controlled by family members descended from the firm’s founders together with various family trusts. Family interests were strongly represented on the board of directors as well. Dubinski knew the family had no current interest in selling—on the contrary, Blaine was interested in acquiring other companies in the kitchen appliances space—so this overture, like a few others before it, would be politely rebuffed. Nevertheless, Dubinski was struck by the banker’s assertion that a private equity buyer could “unlock” value inherent in Blaine’s strong operations and balance sheet. Using cash on Blaine’s balance sheet and new borrowings, a private equity firm could purchase all of Blaine’s outstanding shares at a price higher than $16.25 per share, its current stock price. It would then repay the debt over time using the company’s future earnings. When the banker pointed out that BKI itself could do the same thing—borrow money to buy back its own shares—Dubinski had asked...
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...Blaine Kitchenware Inc. Case Analysis: Muhamad Fahad Sohail Table of Contents Blaine Kitchenware capital structure and payout policy 2 Advantages and Disadvantages of share repurchase move 2 New proposal by CEO TO repurchase stocks from the market and its analysis 3 Recommendation to the CEO as a family member and as an independent consultant 3 How does the proposal differ from paying a special dividend of $4.39 share instead? 4 Blaine Kitchenware capital structure and payout policy Blaine Kitchenware Inc.’s current capital structure is not efficient. The incentive for any public company and Board of Directors should be the increase the value of firm through projects, increased earnings per share value, and the lowering of costs. One way many firm’s effectively increase the value of the firm is to minimize the weighted average cost of capital. The weighted average cost of capital is the costs of a firm in the form of debt and equity. Since Blaine Kitchenware is a public company and issues shares, they have an established capital structure model. By taking on no debt, the value of the firm is unlevered and the firm does not gain the advantage of the interest tax shield. It is because Blaine Kitchenware Inc. has chosen to finance projects by the selling of shares and has not made use of debt issuance that the firm’s value is not fully maximized and the weighted average cost of capital is not minimized. If Blaine Kitchenware Inc. took on debt, the value of the...
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...approach the issue of crafting a marketing plan for 2007? Financial analysis 1. How has the company grown? What is its basic strategy and how has this evolved? 2. Is Ceres financially healthy? What parts of the financial statement might be a reason for confidence or cause of concern? Blaine Kitchenware, Inc. 1. Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? 2. Should Dubinski recommend a large share repurchase to Blaine’s board? What are the primary advantages and disadvantages of such a move? 3. Consider the following share repurchase proposal: Blaine will use $209 million of cash from its balance sheet and $50 million in new debt-bearing interest at the rate of 6.75% to repurchase 14.0 million shares at a price of $18.50 per share. How would such a buyback affect Blaine? Consider the impact on, among other things, BKI’s EPS, ROE, its interest coverage and debt ratios, the family’s ownership interest, and the company’s cost of capital. 4. As a member of the Blaine’s controlling family, would you be in favor of this proposal? Would you be in favor of it as a non-family shareholder? Flash Memory, Inc. 1. Assuming the company does not invest in the new product line, prepare forecasted income statements and balance sheets at...
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...Case Suggested Discussion Questions |Circon (A) | |What motivated Circon Chairman and CEO Richard Auhll? Did he have financial incentives that strongly aligned his interests with those of the | |shareholders? | |Put yourself in Auhll’s shoes moments after receiving the telephone call from U.S. Surgical CEO Leon Hirsch: how do you respond to the hostile| |bid? What factors would you consider? What factors should you consider (if different)? | |Put yourself in the shoes of George Cloutier, moments after being asked by Richard Auhll to join the Circon board. Would you agree to be on | |the board? What role would you wish to play? Is your role consistent with your “duty of care” as a member of the board? | |Did Circon’s poison pill represent a strong or weak barrier to a hostile takeover? Specifically, if a hostile bidder had “broken through” (or| |triggered) the poison pill, what precisely would have happened to Circon’s capital structure and the hostile bidder’s stake in the company? | |(To answer this question see especially Footnote 1 on pages 4 and 5 and Exhibit 2 of the case.) | |Put...
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...Ahmad Mohammad Analysis of Blaine Kitchenware Inc. case Brief Background Blaine Kitchenware Inc., a mid-sized producer of branded small appliances primarily used in residential kitchens, has a very conservative practices regarding taking debt. It only took debt twice in its entire history. An investment banker prompted the idea of repurchasing some of the company’s stocks to the CEO Mr. Dubinki. The CEO is not sure whether the repurchase will benefit the company or not. Problems with Blain current capital structure The main problems that I have noticed in Blain’s capital structure are * Heavy reliance on equity. * Zero debt * Surplus of cash Even though there are not problems at all with the company’s profitability, those problems above does not allow the company to operate at the maximum efficiency. Zero debt does not allow the company to benefit from tax shield. The firm is has extremely conservative practices regarding financing and they have only took debt twice in its entire history. On the other hand, heavy reliance on equity reduces the ROE, making it significantly lower that those of other competitors. Regarding the payouts, the dividend payout ratio had a dramatic increase from 35% in 2004 to 52.9% in 2006, which raises questions about the sustainability of cash growth. At the same time the Earning Per Share ratio (EPS) from 1.29 to 0.91. this is because there is a huge amount of shares available compared to the company’s net income. Actually...
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...Blaine Kitchenware Inc. case study Basic case Blaine Kitchenware was a mid-sized producer of small appliances primarily used in residential kitchens. By 2006, the company’s products consisted of a wide range of small kitchen appliances. For the period 2003 to 2006, the industry posted modest annual unit sales growth of 2%. In 2006, 65% of its revenue was generated from shipments to U.S. wholesalers and retailers. BKI’s market research consistently showed that the Blaine brand was well-known and well-regarded by consumers. During the year ended December 31, 2006, Blaine earned net income of $53.6 million on revenue of $342 million. Approximately 85% of Blaine’s revenue and 80% of its operating income came from the sale of mid-tier products. Blaine’s 2006 EBITDA margin of nearly 22% was among the strongest within the peer group. Blaine’s operating margins had decreased slightly over the last three years. Margins declined due to integration costs and inventory write-downs associated with recent acquisitions. Growth in Blaine’s top line was attributable almost exclusively to acquisitions. Despite the company’s profitability, returns to shareholders had been somewhat below average. Blaine’s return on equity (ROE) was significantly below that of its publicly traded peers. Moreover, its earnings per share had fallen significantly since 2004, partly due to dilutive acquisitions. Stock price appreciation, during 2004-2006, compounded annual return for BKI’s shareholders, including...
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...Blaine Kitchenware’s Current Capital Structure Blaine Kitchenware, Inc， founded in 1927，was a mid-sized producer of branded small appliances primarily used in residential kitchens.BKI had just under 10% of the $2.3 billion U.S. market for small kitchen appliances. Blaine is holding a conservative capital structure that is all consist of common stocks. At the end of 2006, Blaine’s balance sheet was the strongest in the industry. Not only was it debt-free, but the company also held $ 231 million in cash and securities. Common dividends’ paying was one of the largest uses of cash, and the payout ratio is abnormally high 50%. In a word the company have huge cash reserves with not many new profitable project to invest. We believe Blaine was “over-liquid and under-leveled” as the banker concluded from data in Exhibit 1 and 2. Being over liquid could portray the company in a negative way, since many investors might wonder why the company is sitting on such a large amounts of cash. Depending on the industry, it could be, because it is protecting itself from volatility, but it is still may warrant concern from investors. And to absorb the idle cash, pay-out ratio was unreasonably high. Usually, companies prefer raising capital in debt more than equity, because tax shield derived from debt makes debt more attractive to stock issue. And there will be an opportunity cost when a company holds a large sum of cash instead of investing it. What’s more, the shares will scatter...
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...CORPORATE FINANCE – PROF. R.C AGARWAL Case study analysis Blaine Kitchenware Inc. – Capital Structure 51. Priyanka Shimpi 52. Dilip Singh 53. Prabhdeep Singh 54. Shalini Singh 55. Amin-ul-Aziz 3/9/2010 What is a Stock Split? A stock split is a corporate action which splits the existing shares of a particular face value into smaller denominations so that the number of shares increase, however, the market capitalization or the value of shares held by the investors post split remains the same as that before the split. For e.g. If a company has issued 1,00,00,000 shares with a face value of Rs. 10 and the current market price being Rs. 100, a 2-for-1 stock split would reduce the face value of the shares to 5 and increase the number of the company’s outstanding shares to 2,00,00,000, (1,00,00,000*(10/5)). The share price would also halve to Rs. 50 so that the market capitalization or the value shares held by an investor remains unchanged. It is the same thing as exchanging a Rs. 100 note for two Rs. 50 notes; the value remains the same. The impact of this on the share holder: for example ABC is trading at Rs. 40 and has 100 million shares issued, which gives it a market capitalization of Rs. 4000 million (Rs. 40 x 100 million shares). An investor holds 400 shares of the company valued at Rs. 16,000. The company then decides a 4-for-1 stock split (i.e. a shareholder holding 1 share, will now hold 4 shares). For each share, they receive three additional shares. The investor...
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...Decision of Repurchase- The dilemmaBlaine Kitchenware Inc. is faced with a dilemma as to not go for the suggested buyback or to payheed to the investment banker and repurchase its own shares. And also if BKI does repurchase itsshares, should it only partially repurchase the market float or should it go for complete buyback ( inwhich the Blaine family becomes the owner of all the remaining shares).Also they have to think of the effect of repurchase on the various factors like the risks involved inraising a debt for repurchasing (especially when the company is by and large very conservative andit is debt free), its acquisition plans ( which is mainly done by cash and BKI stocks), the earningsper share, dividend per share (which will become more flexible as now the shares will be with thefamily shareholders only and thus a reduction in dividends can be easily accepted), ownershipstructure, capital structure and of course the reputation of the company in the market after thebuyback.Therefore, we can consider three scenarios and then analyze the effect of these on the abovementioned factors and then decide whether Blaine should follow them keeping in mind the existingshareholders' perspective as well as Blaine's controlling family perspective.These scenarios are:1. BKI should not go for any buyback of shares.2. BKI should go for only partial repurchase, by using only its cash and cash equivalents andmarketable securities and not raising any debts.3. The company should buy its entire...
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...Advance Financial Management Graduate Business Administration 645 CRN: 11046 Building 163 – Room 2032 Winter Quarter 2013 Wednesday: 6:00-8:50 Paul Sarmas www.csupomona.edu/~psarmas CATALOG DESCRIPTION: A seminar course in finance utilizing comprehensive cases to simulate the role of the financial manager. 3 seminar-discussion. Prerequisite: GBA 546, all required 500-level courses, and microcomputer proficiency. Concurrent enrollment in GBA 646. Unconditional standing requirement. EXPANDED DESCRIPTION OF THE COURSE AND INSTRUCTIONAL METHODS: A. Expanded Description of the Course: This course reinforces the basic concepts of financial management. The course provides an in-depth discussion of key topics that are critical to financial management: (1) the goals of the firms, (2) financial statement analysis, planning, and forecasting, (3) working capital policy and management, (4) capital budgeting techniques without and with risk, (5) capital structure theory and application, (5) the cost of capital estimation, and (6) long-term financing decisions. In addition, the course examines issues such as lease financing, merger and acquisition, and international financial management. B. Instructional Methods: The delivery system throughout this course will be a combination of class discussion and case analysis. The case analysis will be both in a written format and oral presentation. The amount of lecture will be limited to detailed coverage of concepts...
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...São José, 27 de Janeiro de 2016. Aluno: Antonio José Soares Jr. Disciplina: Fund. Da Mat. Financeira e Estatística Aplicada. Estudo de caso: Blaine Kitchenware Inc.: Estrutura de Capital. Parte 1 1 – O que é uma estrutura de capitais? Resposta: Um conceito simples de estrutura de capital seria: “A forma como uma empresa se financia”, que olhando superficialmente seria dividido entre Capital Próprio (capital dos proprietários ou acionistas) e Capital de Terceiros (credores), já na contabilidade seria descrito como patrimônio líquido e passivo de curto e longo prazo, respectivamente. Como gestor financeiro uma das maiores tarefas é equalizar essa estrutura, encontrando a perfeita harmonia entre capital próprio e endividamento, desta forma minimizando sempre os riscos e aumentando os resultados e consequentemente majorando o valor da empresa. Um dos principais atrativos para o uso do capital de terceiros é que os juros podem ser deduzidos para fins de impostos, o que reduz o custo efetivo da dívida (efeito que deve ser analisado na Blaine), de acordo com BRIGHAM e HOUSTON para que uma estrutura de capital seja eficiente e sirva como uma alavanca para o desenvolvimento da empresa devemos seguir alguns princípios básicos, que seriam: 1 - O risco do negócio, ou o grau de risco inerente às operações da empresa, caso não utilize capital de terceiros. Quanto maior for o risco do negócio da empresa, mais baixo será seu grau de endividamento ótimo; 2 - A posição tributária...
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...Blaine Kitchenware Case Study Answers 1. ABOUT THE COMPANY Blain Kitchenware, Inc. (BKI), founded in 1927, is a mid-sized producer of small appliances for residential kitchens. BKI has an approximate 10% market share of the $2.3 billion U.S. market for small kitchen appliances, with 65% of sales originating from the US market. The company is public since 1994, and the majority of the shares is controlled by the founder's family (62% of outstanding shares), who also have a strong representation in the board of directors. Mr. Dubinski - the CEO since 1992 and great-grandson of one of the founders, successfully completed an IPO in 1994 and gradually moved the production abroad in the early 90s. BIK`s current strategy is to complement its product offerings by acquiring small independent manufacturers or the kitchen appliance product lines of larger diversified manufacturers. The financial data at the end of 2006 reflects a strong financial position: The company has raised nearly no debt, it is very liquid, but also under-levered. BKI is one of the strongest companies in this industry in terms of EBITDA margin (22% in 2006), high level of cash holdings and no debt. However, the shift toward higher-end product line could not prevent the margins from a slight decline over the last three years. This was mainly explained by the integration costs and inventory write-downs due to the acquisitions completed so far. The other reason was...
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