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Transcript of KOHLER
Avoid of getting in the court——
Offer price converges to the
What should the stock price be?
Control Premium & Minority Discount
Implied Median Minority Discount =
1 – [1/(1 + median control premium)]
Lead Group 8
Qiwen Li, Fangli Ren,
Sijia Chang, Xuying Zhang,
Fei Xu, Yuhang Hong,
Kohler stay in private aim to avoid reporting its financial results, which viewed as to be company’s continued success.
1. old restricted stock= 250 new restricted stock with voting class
2. 1 common stock = 1voting stock and nonvoting class series
Which dilute outsider’s control of the whole company
Ownership and Control of Kohler Co.
Our case’s main problem
Kohler Co. Share Price
Kohler’s offer price = $55,400 per share
Dissenter Group claimed price = $273,000 per share
Negotiate with outside stock holders
Fight with dissenter group on the court
Our Group’s Work
Value Kohler’s price per share by DCF model
Choosing comparable companies from two main groups in Kohler to estimate beta, D/E ratio and multiples
Calculating FCFF by FCFF = EBIT (1-T) + Depreciation - capital expense -changing in net working capital
Kohler Company has four different groups:
Kitchen& Bath (NI percent=77.4%)
Power Systems (18.06%)
We use Kitchen & Bath and Power Systems as the main objects of study, as their total net income is over 95% of the company’s total net income.
Cost of Debt
= Interest Expense/Outstanding Debt
is the sum of
Current Maturities of LTD
average them to get the estimated Cost of Debt 6.42%
Risk free rate: 6% (20-yr T-bill);
Market risk premium: 5.36% (historical data)
Tax Rate=Tax Expense/Pretax Income
Kohler's company by group
The D/E ratio of bath & kitchen division is 0.288; the power system division is 0.323, thus to get
weighted average D/E ratio is 0.2974.
unlever each company’s beta:unlevered beta=levered beta/(1+D/E)
FCFF=EBIT*(1-T)+ Depreciation and Amortization-capital expenditure-change in working capital.
=Short-term borrowing + Current Maturities LTD + Long-term Debt-cash and equivalents
=Firm value – net debt = 785.06 m
=Equity value/ shares outstanding
power system section
2-10% in countries with relatively effective investor protections (e.g., U.S. and U.K.)
Analysts usually apply
illiquidity discount for private firms.
Type of Assets
Health of The Firm
Cash Flow Generating Capacity
We use 25% as illiquidity dicount
Proposed Share Price:
Dissenting shareholders: $273,000
Price Range in Sensitivity Analysis:
From $65,840 to $81,147
EBITDA= Operating income after Depreciation
+ Depreciation and Amortization
EBIAT=opearting income after depreciation*(1-T)
3 year's data