Restructuring Nova Chemical Corporation
RESTRUCTURING NOVA CHEMICAL CORPORATION
GROUP 9 ABEL BESONG NATION BOBO PAUL BOAHENG BUSAYO APANISHILE LITA ASTUTI NAPITUPULU
Q1
Q2
Q3
Q4
Q5
Offered Price of $150/$160 million Acceptable: Justification of Method
Market Valuation: Revenue (Sales) Multiples
Revenue multiples is preferred because it is less affected by accounting choices.
The approach measures the market value of the operating assets of IPD in relation to market value of operating assets of comparable companies. IPD is not fully integrated with the rested of the company hence we use basic industry comparables multiples.
We assume that the multiples ratios of comparable companies of 1988 remain constant.
Q1
Q2
Q3
Q4
Q5
Offered Price of $150 /$160 million Acceptable: Justification of Method Offer Price of $160 million is not acceptable from the result given bellow:
There are four comparable companies used in the computation of IPD value as shown in table1 bellow. The multiple used is Enterprise Value/Revenue multiple and ratios calculation is provided in appendix A table 8. Resultantly, IPD market value of its operating assets ranging from $367.78million to $664.15million as provided in table1. IPD value relative to industry average multiple amounts to $486.20million. Given the realized IPD value range we expect United Chemical to value IPD assets close to its own revenue multiple value of 0.86 which results in valuation of about $500.00million as it can use its efficiency production methods to unlock IPD value to attain its revenue multiple. However, United Chemical might discount the value of IPD because it has to upgrade the assets but this can be offset by likely expected synergies opportunities. On the basis of relative valuation approach offer price of $150.00million/ $160.00million is not acceptable as its too low.
Q1
Q2
Q3
Q4
Q5
Offered Price of $150/$160 million Acceptable: Justification of Method Table 1: Market
GROUP 9 ABEL BESONG NATION BOBO PAUL BOAHENG BUSAYO APANISHILE LITA ASTUTI NAPITUPULU
Q1
Q2
Q3
Q4
Q5
Offered Price of $150/$160 million Acceptable: Justification of Method
Market Valuation: Revenue (Sales) Multiples
Revenue multiples is preferred because it is less affected by accounting choices.
The approach measures the market value of the operating assets of IPD in relation to market value of operating assets of comparable companies. IPD is not fully integrated with the rested of the company hence we use basic industry comparables multiples.
We assume that the multiples ratios of comparable companies of 1988 remain constant.
Q1
Q2
Q3
Q4
Q5
Offered Price of $150 /$160 million Acceptable: Justification of Method Offer Price of $160 million is not acceptable from the result given bellow:
There are four comparable companies used in the computation of IPD value as shown in table1 bellow. The multiple used is Enterprise Value/Revenue multiple and ratios calculation is provided in appendix A table 8. Resultantly, IPD market value of its operating assets ranging from $367.78million to $664.15million as provided in table1. IPD value relative to industry average multiple amounts to $486.20million. Given the realized IPD value range we expect United Chemical to value IPD assets close to its own revenue multiple value of 0.86 which results in valuation of about $500.00million as it can use its efficiency production methods to unlock IPD value to attain its revenue multiple. However, United Chemical might discount the value of IPD because it has to upgrade the assets but this can be offset by likely expected synergies opportunities. On the basis of relative valuation approach offer price of $150.00million/ $160.00million is not acceptable as its too low.
Q1
Q2
Q3
Q4
Q5
Offered Price of $150/$160 million Acceptable: Justification of Method Table 1: Market