ADVANCED CORPORATE EXAM Harvard Case Solution & Analysis


If I was at the place of Mr. Vincent then I would have taken the step to take control of Robertson Inc. in 2003 based on the analysis that has been performed. There are qualitative and quantitative factors that support this decision. Monmouth Inc. has been the largest producer of the utilities and electrical appliances within the Oil and Gas industry.

The management wanted to bring diversification into its business because of its concerns regarding the volatility and vulnerability in this nature of business and for avoiding the dependencies over oil and gas industry. For this reason, the Robertson Tool Company seemed to be the most practicable investment opportunity in terms of the qualitative factors and the Net Present Value.

On the other hand, there were also areas of concern for the company such as low inventory levels and low sales growth however the company was a leader because of its involvement in cutting and edging tools and it was a leader in the manufacturing of these two products. The brand image of Robertson Company was also high because of its high quality products. , the company holds around 50% of the share of the $75 million market. The company possesses the ability to grow its revenue by 2% of industry having an average growth around 6%. The distribution function was strength of the company and it had capacity to increase the number of outlets to 15,000. Therefore, I would have tried to gain control of Robertson in 2003.

2). (10 points) Based on a discounted cash flow valuation, what is the maximum price that Monmouth can afford to pay?  What about based on market multiples of EBIAT?

The discounted cash flow valuation for Robertson Tool Inc has been performed in excels spreadsheet based on the pro forma projections provided in exhibit 4 of the case. The maximum price that Monmouth Inc can afford to offer to the shareholders of Robertson Inc is $ 84 per share based on the discounted cash flow valuation. Based on this analysis, it has been assumed that the company can grow at the rate of the industry average growth rate of 6%. On the other hand, based on the market multiples of EBIAT, the maximum price that Monmouth Inc can afford to offer to the shareholders of Robertson Inc is $ 64.5 per share.

3). (5 points) Why is Simmons eager to sell its position to Monmouth for $50 per share?  What are the concerns of and alternatives for each of the other groups of Robertson shareholders?

Many other companies along with Monmouth Inc were interested in acquiring Robertson Tool Inc. The first was the Simmons Company, a corporation with a main business of producing nonferrous metals, tools, rubber products and electrical equipment. This company also had invested in 44,000 shares of Robertson stock in the year 2000.

On March 3, 2003, the management of the Simmons Company has approached to the Robertson Tool Company and offered to tender around 75% of Robertson’s outstanding shares for $42 each. A premium of $ 12 was also included within the offer price. However, the Simmons Company could only acquire 23% of the shares of Robertson Inc. Simmons had originally paid $ 42 for proceeding the tender offer but the stock of Robertson is currently closed at $ 44, therefore, to maintain a certain return a proper price of $ 50 needs to be charged by Simmons.

Another reason was the unsatisfied prospect from the NDP and Robertson merger. Given the fact there the total shares of Robertson held by Simmons is 177000, therefore, if the merger takes place it would receive the shares of NDP. However, Simmons considers NDP as a slow growing company and a lackluster performer and since its stock is sold in small volumes, the management of Simmons was afraid that it might not be possible to sell such a huge holding if anything worse happened.

If the position of Simmons is sold to Monmouth, then other expenses and cost of goods sold of Robertson can be reduced. However, the other shareholders of Robertson still have an alternative merger if the operating independence and Robertson management concerns are taken into account. Thus, there would be a tradeoff between the profits and the potential management.

ADVANCED CORPORATE EXAM Harvard Case Solution & Analysis


4). (5 points)What offer would you make in an effort to gain the support of the Robertson family and the great majority of the stockholders, while improving the long-term trend of Monmouth’s earnings per share over the next 5 years?

If I was the owner of Monmouth Inc, then I would have offered a higher price of more than $ 50 per share. If I had to gain the support of the Robertson family then I would have first acquired all the shares of Robertson’s shareholders. After I gained the control of Robertson Tool Inc, I would have implemented strategies to change the structure of the company that would have resulted in increase in the earning per share and growth of the company over the next five years......................

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