...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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...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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...Blaine Kitchenware Case Study Blaine Kitchenware has occupied the industry for over 80 years and continues to gain control in the market it occupies. As the CEO of the company, Mr. Dubinski is faced with the difficult decision of determining what is best for the family company. The following questions will address what decision is the optimal and why it is beneficial for BKI. Ans. 1) The main dilemma in the case is whether Blaine Kitchenware’s should choose to repurchase its own shares or not. If Blaine’s Kitchenware does repurchase its shares, they must consider whether to partially repurchase the market float or go for a complete buyback where Blaine’s family would become the owner of all the remaining shares. They also have to consider of the effect of the repurchase on various factors like the risks involved in raising a debt especially when they are large, very conservative and debt free. They should also consider things such their acquisition plans, their earnings per share and their dividend per share, ownership structure, capital structure and of course the reputation of the company in the market after the buyback. With this in mind we can consider a few situations and then decide what Blaine should do, keeping in mind the perspective of both the existing shareholders' as well as Blaine's family’s. Since no debt is being raised, if all the cash & cash securities plus the market securities are used for the buy-back, his family may like this option. Their management...
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...Blaines Kitchenware Blaine kitchenware has occupied the industry for a over 80 years and continues to gain control in the market it occupies. As the CEO of the company, Mr. Dubinski is faced with the difficult decision of determining what is the best for the family company. The following questions will address what decision is the optimal and why it is beneficial for BKI. * Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? The main dilemma in the case is whether Blaine Kitchenware’s should choose to repurchase its own shares or not. If Blaine’s Kitchenware does repurchase its shares, they must consider whether to partially repurchase the market float or go for a complete buyback where Blaine’s family would become the owner of all the remaining shares. They also have to consider of the effect of the repurchase on various factors like the risks involved in raising a debt especially when they are large, very conservative and debt free. They should also consider things such their acquisition plans, their earnings per share and their dividend per share, ownership structure, capital structure and of course the reputation of the company in the market after the buyback. With this in mind we can consider a few situations and then decide what Blaine should do, keeping in mind the perspective of both the existing shareholders' as well as Blaine's c family’s. Since no debt is being raised, if all the cash & cash securities...
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...Blaine Kitchenware Inc. Take-Home Case Assignment BSAD 342 Prof. Vishwakarma Grady McQuillan Joe Mackay Mitch Chown Alessandro Galeone Discussion questions • Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? The current capital structure and payout policies for Blaine’s Kitchenware Inc in our opinion is not the most appropriate. The firm’s structure is invested primarily in equity, for the most part (other than twice in their history) not incurring any debt. Although the company originally seemed to pride itself in not incurring debt it’s evident that it has long-term affects on the value of the firm. Whether they considered that less debt would provide them with less risk or not, the fact is that they are not maximizing the value of their firm completely by staying away from debt financing. Although risk will increase when their debt increases, debt financing will lower the cost of capital primarily due to tax reduction. The firm will never reach their full potential by acting this conservative with their financing, and in return this affects their shareholders and payout policies. As stated in the case, “Despite the company’s profitability, returns to shareholders had been somewhat below average”. This is due directly to their net income and the amount of book equity. Subsequently, Blaine’s ROE in 2006 was extremely lower than that of its peers. This creates a big...
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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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...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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...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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...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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...Questions for Case studies Ceres Gardening Company Management related questions: 1. What have been the key factors in company’s growth? 2. How has the stock market responded to the company’s performance? Why? 3. What should Ceres’s strategic plan be, given the trends in the organic gardening market? 4. How would you evaluate Ceres’s marketing efforts? Should the GetCeres ™ program be expanded? Why or why not/ 5. What potential financial risks does Ceres face as it crafts its strategy for 2007? 6. If you were the CFO, how would you 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...
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...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 pertaining to each individual case. REQUIRED BACKGROUND OR EXPERIENCE: A. Prerequisites: Fundamental of Financial Management (GBA 546), all required...
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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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...Case Studies Solutions Case Studies Solutions,Article Writing,Assignments,Research Work,Home Work MenuSkip to content Home How We Work ? Refund Policy How to Order ? Disclaimer Contact Us Finance Cases List POSTED ON MARCH 8, 2013 Hello, If u want us to solve any case study from below list, do contact us anytime, We are here to provide the experience, expertise, and professionalism that you are looking for , Our tutors are available 24/7 to assist you what you need, Click Here to submit your Order. ======================================================================================= Acquisition of Consolidated Rail Corp. by Benjamin C. Esty Airbus A3XX: Developing the World’s Largest Commercial Jet by Benjamin C. Esty American Chemical Corp.by William E. Fruhan, John P. Goldsberry American Home Products Corp.by David W. Mullins AQR’s Momentum Funds by Daniel B. Bergstresser, Lauren H. Cohen, Randolph B. Cohen, Christopher Malloy Arundel Partners: The Sequel Project by Timothy A. Luehrman AXA MONY by Andre F. Perold, Lucy White Beta Management Co. by Michael E. Edleson Butler Lumber Co. by Thomas R. Piper Cartwright Lumber Co.by Thomas R. Piper Citigroup 2007: Financial Reporting and Regulatory Capital by Edward J. Riedl, Suraj Srinivasan Clarkson Lumber Co. by Thomas R. Piper Cooper Industries, Inc. by Thomas R. Piper Cost of Capital at Ameritrade by Erik Stafford, Mark L. Mitchell Debt Policy at UST, Inc. by Mark L. Mitchell Dell’s Working Capital...
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... Jonathan Berk and Peter DeMarzo, 3rd ed., Pearson - Prentice Hall, 2014. (SBN-10: 0-13-342415-4; ISBN-13: 978-0-13342415-7) There are several options for accessing the book and MyFinanceLab. You can purchase the book with MyFinanceLab. You can purchase the e-book and MyFinanceLab. You can purchase or rent the book, and purchase MyFinanceLab separately. Please see the last page of this syllabus for details for details on registering for MyFinanceLab. Other required readings are listed in the syllabus and made available through Canvas or Study.net. Slides PowerPoint slides for all of the class sessions will be printed and handed out in class. The slides are also available on Canvas. 2 Cases Cases are available on Study.net which can be accessed through Canvas. Case-related material, if any, will be made available on Canvas. Additional Material...
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