能男牛语降贸多大 公司理财 PROJECT 2 The Whinchat deal Scaup plc is an international pharmaceutical company that was once seen as a safe haven for investors when stock markets became volatile.It had a reputation as a well-managed and solid, but rather unexciting,company operating within a strong industrial sector.However,a number of problems has emerged in recent years to damage its reputation.A major problem for the company has been its failure to develop new drugs to replace a generation of successful drugs, the patents of which had either already expired or were about to expire.Where patents had already expired,rival companies had developed competing generic drugs that had seriously damaged the company's sales and profits.To make matters worse,the company had recently launched two new products,amidst much publicity,which had to be swiftly withdrawn when patients taking the drugs complained of side effects.This led to a severe loss of confidence in the management of the company and it became clear that major changes had to be made Key figures and ratios relating to Scaup plc for the past five years are set out below: Year ended 31 January 1999 2000 2001 2002 2003 Sales(fm) 5426 579.9 487-2 4564 4253 Operating profits(fm) 42-1 435 27-8 243 228 P/E ratio 153 192 143 95 78 In order to restore confidence in the future of the company,the majority of members of the Board of Directors was replaced and Anne Pochard was appointed as Chief Executive Officer. The new Board agreed that the pharmaceutical sector had become fiercely competitive in recent years and it doubted whether the company had the resources or expertise to remain a successful player within the industry.The increasing costs associated with developing new drugs,along with downward pressure,exerted by governments,on prices for prescription drugs led the Board to conclude that a change of direction was needed.Hence,it was decided that the company should reposition itself in the related healthcare market where it already had a small presence.For some years,Scaup plc had been selling a range of antiseptics and disinfectants for use in hospitals and nursing homes.The mission of the company was restated as being: To maximise shareholder value by becoming a leading provider of healthcare products Whinchat Ltd is a family-owned company that produces a small range of healthcare products.The main products of the company are wound dressings and surgical gloves,which are sold to hospitals,surgeries and nursing homes throughout Europe and which enjoy a reputation for their very high quality.The most recent accounts of the company are set out below: Balance sheet as at 31 January 2003 f000 f000 f000 Fixed assets Freehold premises at cost 8,470-2 第1页共9页
公司理财 PROJECT 2 The Whinchat deal Scaup plc is an international pharmaceutical company that was once seen as a safe haven for investors when stock markets became volatile. It had a reputation as a well-managed and solid, but rather unexciting, company operating within a strong industrial sector. However, a number of problems has emerged in recent years to damage its reputation. A major problem for the company has been its failure to develop new drugs to replace a generation of successful drugs, the patents of which had either already expired or were about to expire. Where patents had already expired, rival companies had developed competing generic drugs that had seriously damaged the company’s sales and profits. To make matters worse, the company had recently launched two new products, amidst much publicity, which had to be swiftly withdrawn when patients taking the drugs complained of side effects. This led to a severe loss of confidence in the management of the company and it became clear that major changes had to be made. Key figures and ratios relating to Scaup plc for the past five years are set out below: Year ended 31 January 1999 2000 2001 2002 2003 Sales (£m) Operating profits (£m) P/E ratio 542·6 42·1 15·3 579·9 43·5 19·2 487·2 27·8 14·3 456·4 24·3 9·5 425·3 22·8 7·8 In order to restore confidence in the future of the company, the majority of members of the Board of Directors was replaced and Anne Pochard was appointed as Chief Executive Officer. The new Board agreed that the pharmaceutical sector had become fiercely competitive in recent years and it doubted whether the company had the resources or expertise to remain a successful player within the industry. The increasing costs associated with developing new drugs, along with downward pressure, exerted by governments, on prices for prescription drugs led the Board to conclude that a change of direction was needed. Hence, it was decided that the company should reposition itself in the related healthcare market where it already had a small presence. For some years, Scaup plc had been selling a range of antiseptics and disinfectants for use in hospitals and nursing homes. The mission of the company was restated as being: To maximise shareholder value by becoming a leading provider of healthcare products Whinchat Ltd is a family-owned company that produces a small range of healthcare products. The main products of the company are wound dressings and surgical gloves, which are sold to hospitals, surgeries and nursing homes throughout Europe and which enjoy a reputation for their very high quality. The most recent accounts of the company are set out below: Balance sheet as at 31 January 2003 £000 £000 £000 Fixed assets Freehold premises at cost 8,470·2 第 1 页 共 9 页
链剥将发多大是 公司理财 Less accumulated depreciation 4846 7,9856 Plant and equipment at cost 17,8543 Less accumulated depreciation 13.9062 3,9481 Motor vans at cost 3,7183 Less accumulated depreciation 1.4281 2.2902 14,223-9 Current assets Stock 1,3467 Trade debtors 1,4906 Cash at bank 2.0129 4,8502 Less Creditors:Amounts falling due within one year Trade creditors 1,5764 Proposed dividend 2.600-0 Accrued expenses 1808 4.3572 4930 14,7169 Less Creditors:Amounts falling due beyond one year 7%Debentures 7.000-0 7.7169 Capital and reserves fl Ordinary shares 2,000-0 Retained profit 5,7169 7.716.9 Profit and loss account for the year ended 31 January 2003 f000 f000 Sales 45,9248 Less Cost of sales 19.8536 Gross profit 26.0712 Selling and distribution expenses 12,5962 Administration expenses 8,8686 21,4648 Operating profit 4,6064 Finance charges 702-5 Net profit before taxation 3,9039 Corporation tax 7808 Net profit after taxation 3,123-1 Proposed dividend 2.600-0 Retained profit 5231 Francis Whinchat founded the business in 1971 and has been the Chief Executive and Chairman of the company since that date.However,ill health has recently forced him to consider his future and also to consider the future of the company.Although the founder has 第2页共9页
公司理财 Less accumulated depreciation Plant and equipment at cost Less accumulated depreciation Motor vans at cost Less accumulated depreciation 484·6 17,854·3 13,906·2 3,718·3 1,428·1 7,985·6 3,948·1 2,290·2 14,223·9 Current assets Stock Trade debtors Cash at bank 1,346·7 1,490·6 2,012·9 4,850·2 Less Creditors: Amounts falling due within one year Trade creditors Proposed dividend Accrued expenses 1,576·4 2,600·0 180·8 4,357·2 493·0 14,716·9 Less Creditors: Amounts falling due beyond one year 7% Debentures 7,000·0 7,716·9 Capital and reserves £1 Ordinary shares Retained profit 2,000·0 5,716·9 7,716.9 Profit and loss account for the year ended 31 January 2003 £000 £000 Sales Less Cost of sales Gross profit Selling and distribution expenses Administration expenses Operating profit Finance charges Net profit before taxation Corporation tax Net profit after taxation Proposed dividend Retained profit 12,596·2 8,868·6 45,924·8 19,853·6 26,071·2 21,464·8 4,606·4 702·5 3,903·9 780·8 3,123·1 2,600·0 523·1 Francis Whinchat founded the business in 1971 and has been the Chief Executive and Chairman of the company since that date. However, ill health has recently forced him to consider his future and also to consider the future of the company. Although the founder has 第 2 页 共 9 页
碰剥经悔贸多大号 公司理财 two children,neither has shown an interest in the business.The idea of allowing non-family members to manage the business was regarded by the Whinchat family as unacceptable and so the various family members,who owned all the issued shares,agreed to sell the company. When Anne Pochard discovered that Whinchat Ltd was for sale,she expressed an immediate interest in entering into negotiations with the Whinchat family.She believed that this was an outstanding opportunity to acquire a range of high quality products with a strong brand image.It provided an immediate and strong presence in markets that the Board of Directors of Scaup plc had recently identified as being of particular interest. The Finance Director of Scaup plc,David Shearwater,was the first among the new Board of Directors to express reservations concerning the possible acquisition.Although he acknowledged the possible benefits that might accrue,he argued that Scaup plc had no previous experience in acquiring companies and that the new Board of Directors had not yet developed a clear view as to how the acquisition process should be approached or managed. As a result,there was a risk that the acquisition of Whinchat Ltd would not turn out to be as successful as Anne Pochard was expecting.David also wondered whether investors would be prepared to support the deal given the recent history of Scaup plc.The Board of Directors debated the issue and,by a narrow majority,decided to support Anne's wish to enter into negotiations with the Whinchat family with a view to buying all the shares of the company. However,it was agreed that an independent firm of consultants,Bittern Associates,should be appointed to advise the Board throughout the period of negotiations. The Finance Department of Scaup plc extracted the following information as at 20 February 2003 relating to healthcare companies from a financial newspaper: 12 month High Low Company Price(p) +/ Yld P/E 6731/2 478 Curlew International 622 +2 2-3 10-5 780 460 Fieldfare 5921/2 +121/2 1-2 11-5 2791/2 1721/2 Plover UK 1941/2 + 1-2 12-5 1821/2 1171/2 Nightingale Healthcare 1171/2 -51/2 33 6-8 266 1211/2 Turnstone Health Products 2021/2 +31/2 26 83 316 164 Wigeon Group 2961/2 18 97 The Finance Department also provided the following ratios for each of the companies listed above: Market value*/Book value* Sales/Market value* Curlew International 37:1 171 Fieldfare 28:1 16:1 Plover UK 36:1 151 Nightingale Healthcare 291 191 Turnstone Health Products 32:1 23:1 Wigeon Group 27:1 14:1 These values refer to the ordinary shares of each company 第3页共9页
公司理财 two children, neither has shown an interest in the business. The idea of allowing non-family members to manage the business was regarded by the Whinchat family as unacceptable and so the various family members, who owned all the issued shares, agreed to sell the company. When Anne Pochard discovered that Whinchat Ltd was for sale, she expressed an immediate interest in entering into negotiations with the Whinchat family. She believed that this was an outstanding opportunity to acquire a range of high quality products with a strong brand image. It provided an immediate and strong presence in markets that the Board of Directors of Scaup plc had recently identified as being of particular interest. The Finance Director of Scaup plc, David Shearwater, was the first among the new Board of Directors to express reservations concerning the possible acquisition. Although he acknowledged the possible benefits that might accrue, he argued that Scaup plc had no previous experience in acquiring companies and that the new Board of Directors had not yet developed a clear view as to how the acquisition process should be approached or managed. As a result, there was a risk that the acquisition of Whinchat Ltd would not turn out to be as successful as Anne Pochard was expecting. David also wondered whether investors would be prepared to support the deal given the recent history of Scaup plc. The Board of Directors debated the issue and, by a narrow majority, decided to support Anne’s wish to enter into negotiations with the Whinchat family with a view to buying all the shares of the company. However, it was agreed that an independent firm of consultants, Bittern Associates, should be appointed to advise the Board throughout the period of negotiations. The Finance Department of Scaup plc extracted the following information as at 20 February 2003 relating to healthcare companies from a financial newspaper: 12 month High Low Company Price(p) +/- Yld % P/E 6731/2 780 2791/2 1821/2 266 316 478 460 1721/2 1171/2 1211/2 164 Curlew International Fieldfare Plover UK Nightingale Healthcare Turnstone Health Products Wigeon Group 622 5921/2 1941/2 1171/2 2021/2 2961/2 + 2 + 121/2 ..... – 51/2 + 31/2 ..... 2·3 1·2 1·2 3·3 2·6 1·8 10·5 11·5 12·5 6·8 8·3 9·7 The Finance Department also provided the following ratios for each of the companies listed above: Market value*/ Book value* Sales/ Market value* Curlew International Fieldfare Plover UK Nightingale Healthcare Turnstone Health Products Wigeon Group 3·7:1 2·8:1 3·6:1 2·9:1 3·2:1 2·7:1 1·7:1 1·6:1 1·5:1 1·9:1 2·3:1 1·4:1 * These values refer to the ordinary shares of each company 第 3 页 共 9 页
碰男华经海贸墨大号 公司理财 In the early stages of negotiation between the two companies,the following information was provided by Francis Whinchat: The market value of the freehold premises of Whinchat Ltd was estimated to be between f32 million and f33 million. The sales of Whinchat Ltd are expected to grow at about 2 or 3 per cent each year over the next five years.The market is fairly competitive and there is little prospect of improved growth rate over this period.Thereafter,sales are likely to stabilise. Operating profit margins are likely to remain at their historic levels,which are between 10 per cent and 12 per cent for the foreseeable future. Replacement costs of fixed assets will be more or less in line with the annual depreciation charge.In addition,however,the company is committed to a major upgrade of plant and equipment costing fl-8 million over the next three years.The cost of this upgrade would be spread evenly over the three-year period. Additional working capital over the next five years will be 20 per cent of sales growth. An exceptional dividend had been paid during the year to 31 January 2003.In previous years,the dividend paidhad varied between f220,000 and f260,000. Following the initial negotiations,the Directors of Scaup plc decided that,in the event of a price being agreed for the shares in Whinchat Ltd: The total after-tax savings in operating expenses from merging the sales and distribution channels of each company would be between f100,000-f120,000 per year.These figures are not included in the operating profit margin estimates mentioned above. The shares in Whinchat Ltd will be paid for in cash,which would be raised by a rights issue of ordinary shares. Scaup plc has an estimated cost of capital of 8 per cent.It has 10 million ordinary shares in issue and the current market value of a share is f10-64. Assume a corporation tax rate of 20 per cent on operating profits(payable in the current year)and a lower rate of income tax on dividends of 10 per cent. Required: Assume that you are a consultant with Bittern Associates. You are required to write a report for the Board of Directors of Scaup plc that: (a)suggests with reasons: (i)a reserve price per share in Whinchat Ltd that is appropriate for the Whinchat family; (ii)a reserve price per share in Whinchat Ltd that is appropriate for the shareholders of Scaup plc for use in negotiations concerning the acquisition of the ordinary shares in Whinchat Ltd. (25 marks) (b)sets out recommendations for a systematic approach to the identification,evaluation and management of future company acquisitions. (15 marks) (c)sets out recommendations concerning: (i)the number of rights shares that should be issued; (ii)the price at which each rights share should be issued to finance the deal;and (iii)the likely value of an ordinary share in Scaup plc following the rights issue. 第4页共9页
公司理财 In the early stages of negotiation between the two companies, the following information was provided by Francis Whinchat: – The market value of the freehold premises of Whinchat Ltd was estimated to be between £32 million and £33 million. – The sales of Whinchat Ltd are expected to grow at about 2 or 3 per cent each year over the next five years. The market is fairly competitive and there is little prospect of improved growth rate over this period. Thereafter, sales are likely to stabilise. – Operating profit margins are likely to remain at their historic levels, which are between 10 per cent and 12 per cent for the foreseeable future. – Replacement costs of fixed assets will be more or less in line with the annual depreciation charge. In addition, however, the company is committed to a major upgrade of plant and equipment costing £1·8 million over the next three years. The cost of this upgrade would be spread evenly over the three-year period. – Additional working capital over the next five years will be 20 per cent of sales growth. – An exceptional dividend had been paid during the year to 31 January 2003. In previous years, the dividend paidhad varied between £220,000 and £260,000. Following the initial negotiations, the Directors of Scaup plc decided that, in the event of a price being agreed for the shares in Whinchat Ltd: – The total after-tax savings in operating expenses from merging the sales and distribution channels of each company would be between £100,000 – £120,000 per year. These figures are not included in the operating profit margin estimates mentioned above. – The shares in Whinchat Ltd will be paid for in cash, which would be raised by a rights issue of ordinary shares. Scaup plc has an estimated cost of capital of 8 per cent. It has 10 million ordinary shares in issue and the current market value of a share is £10·64. Assume a corporation tax rate of 20 per cent on operating profits (payable in the current year) and a lower rate of income tax on dividends of 10 per cent. Required: Assume that you are a consultant with Bittern Associates. You are required to write a report for the Board of Directors of Scaup plc that: (a) suggests with reasons: (i) a reserve price per share in Whinchat Ltd that is appropriate for the Whinchat family; (ii) a reserve price per share in Whinchat Ltd that is appropriate for the shareholders of Scaup plc for use in negotiations concerning the acquisition of the ordinary shares in Whinchat Ltd. (25 marks) (b) sets out recommendations for a systematic approach to the identification, evaluation and management of future company acquisitions. (15 marks) (c) sets out recommendations concerning: (i) the number of rights shares that should be issued; (ii) the price at which each rights share should be issued to finance the deal; and (iii) the likely value of an ordinary share in Scaup plc following the rights issue. 第 4 页 共 9 页
链喇倚餐多方孝 公司理财 In answering part (c),you should assume that shareholders in Scaup plc have been made aware of the impending purchase of Whinchat Ltd and that the agreed price to acquire the shares in Whinchat Ltd is the reserve price identified in your answer to (a)(ii) above. (10 marks) When answering parts (a)and (c),you should clearly state any assumptions and reasoning that you have made and you should show key workings.Possible options available should be examined and any suggestions or decisions that are made must be supported by appropriate arguments. (50 marks) SUGGESTED ANSWERS FOR PROJECTS The Whinchat deal The case study can be approached in various ways.Below are some calculations and points that may have been made by students.However,they should only be regarded as indicative. (a)Book value of ordinary shares The book value of an ordinary share in Whinchat Ltd is: f000 f000 Fixed assets 14,223-9 Current assets 4.8502 19,0741 Less Creditors -falling due within 1 year 4,357-2 -falling due after 1 year 7.000-0 113572 Book value of net assets 7,7169 Book value per share f7,7169/2,000 f386 Market value/book value The mean market value/book value ratio of similar companies is 3.15:1.Using this as a guide,the market value of a share in Whinchat Ltd is 3.15 x f3-86=f12.16. Sales/market value The mean sales/market value ratio of similar companies is 1-73:1.Using this as a guide,the market value of a share in Whinchat Ltd is [(f45,924-8/173)/2,000]=f13-27. Market value The market value measure is based on the assumption that all assets,other than the freehold premises,are valued at book value and that the lowest market price stated is valid for the freehold premises: f000 f000 Fixed assets 第5页共9页
公司理财 In answering part (c), you should assume that shareholders in Scaup plc have been made aware of the impending purchase of Whinchat Ltd and that the agreed price to acquire the shares in Whinchat Ltd is the reserve price identified in your answer to (a)(ii) above. (10 marks) When answering parts (a) and (c), you should clearly state any assumptions and reasoning that you have made and you should show key workings. Possible options available should be examined and any suggestions or decisions that are made must be supported by appropriate arguments. (50 marks) SUGGESTED ANSWERS FOR PROJECTS The Whinchat deal The case study can be approached in various ways. Below are some calculations and points that may have been made by students. However, they should only be regarded as indicative. (a) Book value of ordinary shares The book value of an ordinary share in Whinchat Ltd is: £000 £000 Fixed assets Current assets Less Creditors – falling due within 1 year – falling due after 1 year Book value of net assets Book value per share 4,357·2 7,000·0 £7,716·9/2,000 14,223·9 4,850·2 19,074·1 11,357·2 7,716·9 £3·86 Market value/book value The mean market value/book value ratio of similar companies is 3·15:1. Using this as a guide, the market value of a share in Whinchat Ltd is 3·15 x £3·86 = £12·16. Sales/market value The mean sales/market value ratio of similar companies is 1·73:1. Using this as a guide, the market value of a share in Whinchat Ltd is [(£45,924·8/1·73)/2,000] = £13·27. Market value The market value measure is based on the assumption that all assets, other than the freehold premises, are valued at book value and that the lowest market price stated is valid for the freehold premises: £000 £000 Fixed assets 第 5 页 共 9 页