Ford Motor Co.s Value Enhancement Plan (A) Harvard Case Solution & Analysis

In April 2000, the company Ford Motor Co announced enhance shareholder value plan (IAP) significantly recapitalize the ownership structure of the company. Ford amassed $ 23 billion in cash reserves and a VEP will return as much as $ 10 billion this cash to shareholders. In exchange for each share currently held, the plan would give shareholders one new share plus the opportunity to receive $ 20 in cash or additional new Ford common stock. Shareholders electing to receive cash will be taxed on these distributions at the rate of capital gains. Among other things, the plan called for the Ford family means to obtain liquidity without diluting them 40% of the voting rights (even if they own only 5% of the shares). Students will have to fight with the following questions: Why Ford is offering this deal instead of a traditional share repurchase or cash dividend? What interests the Ford family factor in the decision, and that the same transaction involves the future involvement of the family in the company? Why Ford distribution of such large amounts of money at any given point in time? Is the distribution of the signal change in appetite to make future acquisitions or investments? If shareholders collectively decided to get at least $ 10 billion in cash, as Ford would distribute the remaining money? "Hide
by Andre F. Perold Source: Harvard Business School 17 pages. Publication Date: January 22, 2001. Prod. #: 201079-PDF-ENG

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