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Kohler Case

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Submitted By linglan9251
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Kohler Co. (A)
Analysis

Section 01
Group 8
Shengjia Ding
Meinong Guo
Shen Teng
He Wang
Cheng Zhong
Mengnan Zhang

Introduction
Kohler Co. is a famous plumbing fixtures manufacturer and expands its business to small engines, generators, furniture and luxury resorts. Kohler Co. is one of the oldest and largest private-owned enterprises in the United States, and outside shareholders owned four percent of Kohler Co. stock in April 1998. The private-owned company has some advantages. On the one hand, Kohler’s business view states that “private ownership and privacy of results help focus our people on implementing big ideas and achieving excellent long-term performance.” On the other hand, Kohler does not need to disclose the financial information to its competitors. Therefore, Herbert V. Kohler, Jr., the Chairman and CEO of Kohler, believes that the private status help the company’s success.
As a result, in early 1998, Herbert Kohler put forward to recapitalize Kohler Co., including purchasing all the outside shareholders’ stocks and restricting stock sales outside in the future. According to Kohler’s valuation, the price for the outside shareholders to is $55.4 thousand per share. However, some outside shareholders do not agree with this suggesting price. They combine the trading shares, the book value of a share, and the possible of an eventual IPO, and assert that one share is worth $273 thousand. In April 2000, Herbert V. Kohler needed to decide whether to fight in the court or to negotiate with the dissenting shareholders. To calculate the share price from the Kohler family’s view and the minority shareholders’ view, this analysis applies the discount cash flow (DCF) model and the multiple approach respectively. We conclude that the proposed Kohler share price of $55.4 thousand is reasonable, and the dissenting shareholders’ price is too high. To

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