Valuation of a Firm

The acquisition offer of Capital City was assessed. The offer of $70 is woefully inadequate. A counter offer of $99 is recommended. In the event that Capital city rejects the counter offer, the recommendation is that the board divest the Apparel Division.

COMPANY VALUATION AND STRATEGIC ALTERNATIVES: INTERCO

City Capital offered $70 per share in an acquisition bid for Interco. On the basis of advice from counsel, the Interco board rejected this offer as inadequate. Interco is a firm with four profit-generating operational divisions·apparel, general retail, footwear, and furniture. The sales and profit performance of these four divisions vary widely. Essentially, the problem facing the Interco board in mid-1988 is two-fold. First, an adequate valuation of the company's outstanding common shares must be determined and communicated to Capital City. Second, in the event that Capital city rejects to Interco share valuation price, Interco must determine if the divestment of one or more of the company's operating divisions is prudent.

The consulting firm engaged by the Interco board pegged the value range of Interco common shares at $68-to-$80. The consulting firm also indicated that the latest Capital City offer of $70 per share was the equivalent of 11.4 times Interco's operating income. In actuality, however, the Capital

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Some common words found in the essay are:
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Approximate Word count = 1133
Approximate Pages = 5 (250 words per page)

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