Sunbeam Corporation and Chainsaw Al

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  • Topic: Stock, Sunbeam Products, Albert J. Dunlap
  • Pages : 9 (3049 words )
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  • Published : July 30, 2010
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OTTAWA UNIVERSITY

FINANCE ADMINISTRATION

POST-CLASS ASSIGNMENT

MODULE 5

FAHRIAN C.H. CHOE

STUDENT ID: 128370

MELAKA # 03

DUE: JULY 5, 2004

FINAL CASE IN FINANCIAL DECISION MAKING

SUNBEAM CORPORATION AND CHAINSAW AL

Prepared For
Richard Brewington
Instructor
Ottawa University International

Prepared by
Fahrian C.H. Choe
Student
Ottawa University International

June 30th, 2004

CONTENTS

Page

Executive Summary……………………………………………………….i

Introduction………………………. ……………………………………...1 Dunlap’s Action Plan……………………………………………………..2 Accounting Practices Raise Questions…………………………………....4 Lawsuit …………………………………………………………………...5 Discussion………………………………………………………………...6 Conclusion ……………………………………………………………….9 Reference ………………………………………………………………..10

Executive Summary
This report is based on Sunbeam Corporation and Albert Dunlap, the CEO from 1996 till 1998. In July of 1996, Michael Price and Michael Steinhardt hired Dunlap as the CEO and chairman of the board for Sunbeam Corporation. As two of the original investors who bought Sunbeam from bankrupt Allegheny International, Price and Steinhardt together own 42 percent of its stock. Prior to hiring Dunlap they had tried, unsuccessfully, to sell Sunbeam. They believed that he was the one person who could turn the company around and increase stock prices and profits. The increase in stock prices did occur, almost instantly. The turnaround took just fifteen months. On July 19, 1996, the day Dunlap was named chairman and CEO of Sunbeam, the stock jumped 49 percent. The jump increased the share price from 12 ½ to 18 5/8, adding $500 million to Sunbeam’s market value. The stock continued to increase and reached a record high of $52 per share in March 1998. Corporate turnaround specialist Al Dunlap, whose penchant for slashing jobs earned him the nickname "Chainsaw Al," His plan involved massive cuts to the company's product lines, plant closings and major cutbacks in the number of employees at Sunbeam. He called for the same types of cutbacks at previous companies he headed, including Scott Paper. As head honcho at Scott Paper, Sunbeam and other once-sleeping giants, Dunlap has turned around balance sheets with dramatic speed and results. Dunlap had built quite a reputation for himself. He was well regarded by Wall Street and the investment community for his track record in dramatically boosting shareholder value at troubled companies. To investors who made millions by following him, Dunlap was, if not a god, certainly a savior (2). In 1997, on the basis of Sunbeam’s financial statements, it appeared that Sunbeam’s turnaround had been accomplished. In 1998 Sunbeam began a series of acquisitions of Coleman Inc., First Alert Inc., and Mr. Coffee, all synergistic businesses related to Sunbeam’s core businesses. In the first Quarter of 1998 the stock hit its all-time high of $52 per share. By June 1998, the company's directors had fired Dunlap, commenting that they had lost confidence in his leadership abilities. Dunlap's dismissal comes less than two years after the company recruited him. Three years later, Sunbeam was in bankruptcy court and by May 2001 Dunlap was charged with fraud by the SEC. Dunlap was charged with orchestrating a fraudulent scheme to create the illusion of the successful restructuring of Sunbeam and facilitate the sale of the Company at an inflated price.(1) By September 2002, Dunlap had been banned from ever serving as an officer or director of a public company. He also was required to pay a $500,000 fine. (The New York Times; September 5, 2002). By December 2002, the company announced that it had emerged from Chapter 11 bankruptcy protection. This announcement came with a name change for the company, from Sunbeam Corporation to American...
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