(Table of Contents) 1. 2. 3.LBO 4.TXU 5. LBO 6. (Overview of Leveraged Buyouts) (Mechanics of an LBO Analysis) (LBO Best Practices) (TXU Case Study) (LBO Modeling) (Homework Assignment) (Appendix) 1. Overview of Leveraged Buyouts (LBO) Overview of Leveraged Buyouts An LBO is the acquisition of a company or division of a company using debt for a majority of the purchase price and equity for the remainder. The buyer (the LBO Sponsor or Equity Sponsor) borrows the debt portion of
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The Leveraged Buyout of RJR Nabisco In 1988‚ a war was launched for the control of RJR Nabisco. It ended at the end of the year when KKR won the bidding war with a $ 109 per share offer and took RJR Nabisco private. Before the details of the leveraged buyout (LBO) are discussed‚ it is important to understand what made RJR Nabisco so attractive. RJR Nabisco was a conglomerate company that was involved in mainly two industries. It had divisions in the tobacco and food industries. In the tobacco division
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Bidding for Hertz: Leveraged Buyout Case The dual-track process used by Ford to initiate “consideration of strategic alternatives” makes the bidding process for Hertz more difficult. The bidding group has to spend more time to gather more information required for the process. To be able to give out an acceptable price‚ which maximizes the value for Ford‚ the cost the group has to put to buyout is also higher. Longer time to collect the information means the group lose its competitive advantages
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Chapter 17 Mini Case The Leveraged Buyout of Cheek Products‚ Inc (in millions) 2007 2008 2009 2010 2011 PV of UCF 2007-2011 at 14% Sales $1‚627 $1‚824 $1‚965 $2‚012 $2‚106 = (1‚735/1.14)+(1‚519/1.142)+(1‚188/1.143)+(1‚192/1.144)+(1‚251/1.145) Costs 432 568 597 645 680 4‚848 Depreciation 287 305 318 334 340 EBT 908 951 1‚050 1‚033 1‚086 UTV Less taxes (363) (380) (420) (413) (434) = (1
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Seagate Technology Buyout March 22‚ 2006 By: Rachel Cluck Beth Crocker Heather Preston Jessica Seal Table of Contents Introduction............................................................................3 Objectives ..............................................................................3 Overview................................................................................4 Alternatives – How to Address Seagate’s Low Stock Price ..5 Do Nothing........................
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FOR A LEVERAGE BUYOUT? 2. WHY WOULD INSTITUTIONAL INVESTORS BE WILLING TO FINANCE A LEVERAGE BUYOUT WITH THE CAPITAL STRUCTURE PROPOSED? 3. WHAT RETURN WOULD BE APPROPRIATE FOR THE INSTITUTIONAL INVESTORS ON AN INVESTMENT WITH THIS RISK LEVEL? WHAT RETURN WILL THE INSTITUTIONAL INVESTORS REALIZE IF THEIR TIME HORIZON FOR THE INVESTMENT IS 5 YEARS AND THE PROJECTIONS OF EX. #13 ARE REALIZED? 4. WHERE WILL THE VALUE FOR THE 50% ACQUISITION PREMIUM COME FROM IN THE PROPOSED BUYOUT? 5. WHAT IS THE
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Running Head: LEVERAGE BUYOUT (LBO) OF PRIVATE EQUITY COMPANIES Leverage Buyout (LBO) of Private Equity companies [Writer Name] [Institute Name] [Subject] [Date] Leverage Buyout (LBO) of Private Equity companies Introduction The acquisition of any other organization utilizing an important part of borrowed money (loans or bonds) to meet the cost of acquisition. Frequently‚ the assets of the organization being developed are utilized as collateral for the loans additionally to the
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Kinder Morgan - MBO Richard Kinder and Bill Morgan purchased a master limited partnership pipeline company from Enron for $40 million in 1997‚ founding Kinder Morgan‚ Inc. (KMI) 1. The primary benefit of an MLP comes in the form of tax savings. While shareholders in a corporation face double taxation‚ owners of a partnership are taxed only once (when receiving distributions). Corporate income tax does not exist in the partnership. When cash distributions to MLP owners exceed
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is the senior management of HCA pursuing an LBO of the firm? Prior to the LBO offer‚ HCA was suffering from poor market performance. The firm’s bad-debt expense was growing at a rate faster than anticipated. In 2005‚ uninsured emergency visits and uninsured admissions increased by 9.9% and 8.9% respectively‚ and it is estimated nationally that 85% of uninsured do not pay their medical bills. Moreover‚ the uninsured population was growing at a faster pace in the states HCA operated in than nationally
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Investors led by Kohlberg Kravis Roberts & Co. and Texas Pacific Group will buy TXU Corp.‚ the largest power producer in Texas‚ for $45 billion in the biggest- ever leveraged buyout.The investors are providing $8.5 billion in cash and the rest of the deal will be debt‚ according to people familiar with the matter. The buyout firms will put up $5 billion and Goldman Sachs is investing $1.5 billion‚ Lehman Brothers Holdings Inc.‚ Citigroup Inc. and Morgan Stanley are also investing. KKR‚ run by
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