International Shoe Company, established in 1911, continued to operate in the same segment of the industry until 1966, when the company was renamed as Interco because it had become a major manufacturer of a range of costumer products. The growth strategy of the company was to acquire undervalued businesses and operate them autonomously under the umbrella of Interco. Although overall financial performance of the company remained satisfactory in recent years, apparel and retail businesses had begun to suffer. The company’s stock price became undervalued due to inefficiencies of two divisions. The case discusses two alternatives for Interco at this stage, capital restructuring or sale of shares. For this purpose, value of Interco has to be calculated again using Discounted Cash Flow analysis and comparable transactions analysis to find out if the calculations of Wesserstein, Parrella and Co are correct or not.
Comparable Transaction Analysis
Business Segment 1988 Sales Multiple Range Value Range Median Value Business Segment 1988-Operating Cash Flow Multiple Range Value Range Median Value
Interco Balance Sheet
Interco Segments Financial Information
Daily Stock Price of Investo
Monthly Stock Price of Investo
- Assess Interco's financial performance prior to the Rales brothers' offer. Why doyou think the company was a target of a hostile takeover attempt?
- As a member of Interco's board are you persuaded by the premiums paid analysisand the comparable transactions analysis? Why?
- Wasserstein, Perella & Co. established a valuation range of $68-80 per commonshare for Interco. Show that this valuation range can follow from the assumptionsdescribed in the discounted cash flow analysis provided (exhibit 12). As a member ofInterco's board, which assumptions might you have questioned?
- What are your reactions to the roles played in Interco's situation by its board ofdirectors? by Wasserstein, Perella & Co.?