At the beginning of 2001, the CEO of Canadian Pacific Limited (CPL), the oldest conglomerates of Canada, was considering the available opportunities and challenges for the company’s future. CPL had diversified operations in railway, shipping, natural resources, and hotels. CPL’s market capitalization of CDN$13.5 billion showed a conglomerate discount, evaluated at 12 to 35 percent of the value. The CEO evaluated the benefits and expenses of asset divestitures or spinoffs to reduce this conglomerate discount and enhance the value of shareholders. Whether it would yield the results for CPL by continuously operating with related business to maintain economies of scope and scale, and preserve synergies? What would be the tax liability for each of the alternatives?Canadian Pacific Unlocking Shareholder Value In A Conglomerate Case Solution
However, various legal and operational implications were needed to consider. The CEO was aware that whatever decision he choose, he had to make it soon. He examined the alternatives that could leverage the maximum value for its shareholders.
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