Telsys Case Study
Outstanding Equity and Managerial Issues
½.What Percent of ITC Stock will Chesney's Group, and VCG hold? Prior Info:
British Holdings: 1,800,000/43,711,944= 4.12%
ITC Holdings: 8,761,994/43,711,944= 20.04%
We know that the available amount of equity left is roughly 76% after the British institutions and ITC are given their shares. Therefore, the remaining 76% will be split according to the amount of investment VCG makes, which will be ranging from $7-10.4 million.
VCG invests: 7 million= 7,000,000 * (1/ .52) = 13,461,538 shares which would leave them with a 30.8% investment in the company.VCG, however, understand that Chesney and Telsys are completely relying on their investment, therefore, giving them the ability to negotiate for a higher percentage hold of the ITC stock.
VCG Invests: Maximum 10.4 million= 10,400,000 * (1/.52) = 20,000,000 shares leaving them with a 45.75% investment in the company. Thus VCG will want a minimum of a 45.75% hold on the ITC stock. This scenario would leave Chesney/Telsys with a 30% hold of the ITC stock.
If VCG invests 10.4 million they will most likely end up being stuck with a 45.75% hold of the ITC stock. Mainly, because they show that they are overly interested in the investment and will not have much room for negotiation
If VCG invests 7 million, they will be able to get a higher percentage hold of the ITC stock, due to the fact that Telsys is completely relying on their investment
VCG Range: 46-35%
Telsys Range: 40-30%
3. What will be the composition and size of ITC's Board of Directors? 11 Board of Directors would be a sufficient amount, and it is a positive trait to ensure that the BOD consists of an odd number. The Board should also consist of members directly related to the company and a group of industry experts. Depending on which group you would want to delegate more power to should decide whether the ratio is say 6/5 internal/external, or 5/6...
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