This website uses cookies to ensure you have the best experience. Learn more

Wrigley Essay

974 words - 4 pages

Case Study:
Wrigley Jr. Company – Capital Structure

Case Problem:
The managing partner of Aurora Borealis LLC, a hedge fund that strategized to focus on distressed companies, asked an associate to initiate the research for a potential investment in Wrigley. Aurora specialized in finding opportunities for corporate restructures, to invest significantly in the stock of the target firm and then persuade management to restructure. They noted that Wrigley had about $13.1 billion in common equity and did not have any debt on their balance sheet. Chandler was asked to perform an analysis to support the assumption that Wrigley can borrow $3 billion at a credit rating of BB to B, to yield ...view middle of the document...

One of the considerations that Chandler did not make is what the effect will be on Wrigley’s book value if a repurchase or dividend payout is done. Wrigley’s estimated tax rate is 40%, therefore they have a shield of $1.2 billion. Wrigley’s market value of equity will decline by $1.8 billion.
If Wrigley decides to move forward with the recapitalization plan they can take the $3 billion of debt to either buy back shares or pay a dividend on the existing shares. If they repurchased shares this would result in a decrease of their current shares outstanding and an increase to treasury stock. At a price of $56.37 (exhibit 5), Wrigley’s would apply the current tax shield of $5.163 (1.2billion/232.44billion shares). This would make the new equity value $61.53. At that price they would repurchase 48,756,704 shares of outstanding stock. This would decrease current shares outstanding from 232.44 million to 232.39 million. Debt would grow from $0 to $3 billion and assets would grow by $1.2 billion. If they paid out a dividend there would be no affect to the company’s current outstanding stock status.

If there is a recapitalization there will be an impact on the reported earnings per share. In 2001, Wrigley’s had an EPS of $1.61. If there was a share repurchase done the EPS would change to $0.49. The number of outstanding shares would decrease and if the EBIT remained constant this would result in an increased EPS, however, the EBIT would decrease as well because there would be $390 million in interest payments ($3billion * 13% cost of debt). Since both the numerator and denominator both took sharp declines this would cause the EPS to drop drastically.
This will also determine the bond rating that should be used. If we consider the amount of the debt coverage ratio and compare it to the chart shown in Exhibit 6 it...

Other assignments on Wrigley

Economy Effect Of Marijuana Essay

277 words - 2 pages Modern American History by Alan Renga 2nd Mid Term! You will be given 3 Short Essay questions and 20 Multiple Choice questions deriving from this list! 80 points total! The 1920s Warren Harding then Calvin Coolidge Tea Pot Dome 1st Red Scare Immigration Restriction, Sacco and Vanzetti Langston Hughes, Marcus Garvey, KKK Prosperity, advertising Prohibition, Al Capone Flappers, Clara Bow, Rudolph Valentino Babe Ruth, Jack Dempsey

The Vc Shakeout Essay

2033 words - 9 pages ECONOMY 26 Luring a big firm to town is not the secret to job growth DEFEND YOUR RESEARCH 30 Are morning people wired for success? VISION STATEMENT 32 The social web’s east-west divide COLUMN 38 Warren Bennis looks back on his surprising path to fame New Thinking, Research in Progress New Thinking, Research in Progress FIRST The VC Shakeout Venture capital hasn’t worked for a decade and must be radically

Hospitals Paper

6014 words - 25 pages I hope to provide in this paper a comprehensive understanding for what the term “hospital” has become. Hospitals are an extremely complex system that man has created and shaped and reshaped throughout history. My goal in writing and researching this paper will be to provide those who read it a clear understanding on how the hospital system got to where it is today, and to shed some light on the many organizations that affiliate with and

Course Syllabus

2610 words - 11 pages [pic] COURSE SYLLABUS Semester: Fall, Year: 2012  College Mission Statement Richard J. Daley College provides high-quality education which leads to academic success, career development, and personal enrichment that fulfill diverse community needs. Mathematics Department Mission Statement Our mission is to deliver excellent service and to provide learning opportunities by offering a wide range of mathematics courses, which will help our


1477 words - 6 pages Boeing Management Planning Heather Oetzel MGT 330 October 22, 2012 Joe Cheng Abstract Boeing is known as “the world’s leading aerospace company and the largest manufacturer of commercial jetliner and military aircraft combined ("The Boeing Company: About Us", 2012). Every company uses different types of management techniques including how the planning function of management is used. Planning allows organizations to develop how the

Assisted Suicide

1015 words - 5 pages Should physician-assisted suicide be legal? While I believe if one chooses to end his or own life through physician assistance for reasons that they chose, the choice should be up to the individual. Physician-assisted suicide should be at one's discretion. “Assisted Suicide, also called Voluntary Euthanasia, is currently a contentious issue in many countries. Because Euthanasia is legal in a few modern democracies: the Netherlands, Belgium

Tanglewood Case 1

797 words - 4 pages Tanglewood’s staffing strategy requires the organization to make key decisions about the acquisition, deployment, and retention of the organization’s workforce. In order to accomplish this, Tanglewood’s must make thirteen decisions regarding its staffing levels and its staffing quality. One of the first decisions that Tanglewood needs to choose is to acquire or develop talent. Tanglewood should try to develop their current talent because one


1391 words - 6 pages Есе по въпроса: Кои от всички „действащи” лица могат да се разглеждат като морално отговорни и в какво именно? по казуса Форд „Пинто” Корпоративните злодеяния са нанесли повече вреди на обществото от всички улични престъпления взети заедно. Според данни на ФБР сумата от уличните престъпления възлиза на $3.8 млрд. годишно, а загубите от корпоративните измами между $100 млрд. и $400 млрд. годишно

The Penis

1052 words - 5 pages The short story ”The Penis” is written by Hanif Kureishi. The short story is about a penis, which has been separated from its owner Doug, who we hear from later on. At first though we hear about a guy called Alfie who was “a cutter – a hairdresser – and had to get to work”. He is having breakfast with his wife, when she asks him what he did last night, and if he had a good time last night? Alfie can not remember what he did last night, he then

Managed Care Paper

543 words - 3 pages Managed Care and Case Management Care Marvin Lloyd BSHS/402-Case Management 27 August 2012 Virgil Miller Managed Care are techniques employed to help reduce the cost for providing health benefits and a system for improving organizations quality of care


439 words - 2 pages The life expectancy is lower; so people are not kept alive with drugs for decades in a virtual sleep state. There is less state education; so kids don't have it drilled into them that their only goal in life is to make money, at the cost of 'everything' else. The health care is less; so diseases, usually brought by Westerners, kill many more than they do in countries where drug companies can make a fortune from selling medicines that aren't

Similar Documents

Mncs Essay

669 words - 3 pages page format, i.e. one page) at the beginning of class Case: “InBev and Anheuser-Busch” 1. What is the basis for competitive advantage in the brewing industry? 2. What was the strategic rationale for the deal? 3. Where will the synergies come from? Do you believe it? 4. What type of merger integration issues do you expect? 5. Will this deal create value for InBev shareholders? Case: “Mars and Wrigley” 1. What are the

Fafdsh Essay

1460 words - 6 pages on top of an altoid box. She is wearing devil horns. Mints are supposed to be around so your breath won?t smell with the opposite sex. So if you have good breath, you are going to have a good night. With the sex appeal in this ad it makes the audience think about the opposite sex right away because of the saying ?I?ve got the hots for you.? That must be a heck of a mint. Another company that has to deal with breath is Wrigley?s Big Red Gum. For

Tesco's Marketing Strategy Essay

2282 words - 10 pages pricing and operation target. Every strategy adopted had been under carefully consideration and research so that it now becomes the third largest retailer of the world. In the near future, Tesco may still persist in what it has been doing over these years and continue to make progress. References: Lowe, Michelle(Guildford), Wrigley, Neil(Southampton). 2010. The 'Continuously Morphing' Retail TNC During Market Entry: Interpreting Tesco's

Mgt216 Essay

714 words - 3 pages The first ethical issue presented in the ethics game simulation was whether to warn consumers about the contaminated product and what information to provide consumers about the contaminant. The second ethical issue was whether to sell a product that does not meet U.S. safety requirements in a foreign market that has lower safety restrictions. G-BioSport was not required to meet prior approval from the Federal Drug Administration before they