Telsys Case Study
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
Range of negotiation:
VCG Range: 46-35%
Telsys Range: 40-30%
Since I feel the power of the BOD should be delegated to the Telsys presidents and managers over VCD and Current ITC shareholders, I also believe that the chairman of the Board should be a high ranking official at Telsys such as Bruce Montgomery. If this does not happen, however, I believe whichever organizations is given more representation in the BOD should also be given the position of Chairman of the board. Within the negotiation process this will most likely not occur, so it would be a probable situation to either accept having the Chairman or...
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