Intrinsic Value
Date: January 28, 2013
1. Intrinsic Value for Oshawa: $1,958,680.451
2. To determine the selected intrinsic value, the team examined Oshawa through various avenues. Based on a WACC of .0778. If this is divided by the amount of outstanding shares, the share price would roughly be $51.69. This is extremely high compared to the $26 value the shares currently trade at (exhibit 4, closing share price). However, the price will have to be at a premium to the $26 to create a fair deal for the current Oshawa owners. The fair value that we come in with would have to be between $26 and $51.69. It was also suggested in the report that the price would have to be at least 1 billion.
Next, the team looked at the relative valuations that were calculated. The team used the
Enterprise value to EBITDA as it was based on the comparable companies to Oshawa and fell into a share price range that the team felt was properly valued. The valued share price calculated was in the range of $24.30 to $39.18. The mid-point for this is $31.75, which is where the fair value $ 1,203,163,233.75.
The price to earnings ratio was used in the valuation, but it fell below the $26 value.
Due to this being a business deal, the team did not want to come in with its best offer. The team feels that the fair value listed above is a strong start to the negotiations. However, based on the intrinsic value of $1.9 billion, the team would be willing to raise the initial price if Oshawa rejected it. Overall, based on the market value and what the intrinsic value calculates, the company is worth investing
1. Intrinsic Value for Oshawa: $1,958,680.451
2. To determine the selected intrinsic value, the team examined Oshawa through various avenues. Based on a WACC of .0778. If this is divided by the amount of outstanding shares, the share price would roughly be $51.69. This is extremely high compared to the $26 value the shares currently trade at (exhibit 4, closing share price). However, the price will have to be at a premium to the $26 to create a fair deal for the current Oshawa owners. The fair value that we come in with would have to be between $26 and $51.69. It was also suggested in the report that the price would have to be at least 1 billion.
Next, the team looked at the relative valuations that were calculated. The team used the
Enterprise value to EBITDA as it was based on the comparable companies to Oshawa and fell into a share price range that the team felt was properly valued. The valued share price calculated was in the range of $24.30 to $39.18. The mid-point for this is $31.75, which is where the fair value $ 1,203,163,233.75.
The price to earnings ratio was used in the valuation, but it fell below the $26 value.
Due to this being a business deal, the team did not want to come in with its best offer. The team feels that the fair value listed above is a strong start to the negotiations. However, based on the intrinsic value of $1.9 billion, the team would be willing to raise the initial price if Oshawa rejected it. Overall, based on the market value and what the intrinsic value calculates, the company is worth investing