CORPORATE FINANCE ASSIGMENT
Background
You are the Finance Director of a very large retail company, with stores across the US andin 15 countries worldwide, particularly in Central America and Asia. Your stores sell both
澳洲留學生dissertationgroceries and general merchandise. In 2007 your company, with headquarters in the USand listed in the New York stock exchange, was valued at just under US$100 billion, butsubsequent events in both the stock market and product markets severely depressed itsvalue, leaving investors disappointed.

Your company is facing increasing competition in its main markets, and declining profitmargins. Over the next twelve months it will need to invest heavily into reorganising andaltering its portfolio of products, following changes in consumers’ preferences and demand.In addition, your company has had to face an increasingly contentious public image.Specific criticisms include the company's extensive foreign product sourcing, low rates ofemployee health insurance, resistance to union representation, and alleged racism, amongother things.

The company is considered by the Board of Directors to be financially sound with plenty ofcash reserves and a good mix of debt/equity in its capital structure and certainly within itstarget ratio. However, the solid financial performance in the last financial year has done littleto offset a drop in investors’ confidence as a result of the credit crisis. During the last Boardmeeting the CEO informed the Board that: “There is now considerable pressure from themain shareholders to take measures to improve the value of our company, otherwise ourdepressed stock market value could make us a potential takeover target.” Therefore, theBoard asked the CEO to find a suitable acquisition target company.

The CEO believes that it is strategically important for the company to further diversifygeographically and improve its public image. After considerable research, data gathering
and analysis, the CEO has focussed her attention on Europe, and particularly on the UK, acountry with a relatively good record of corporate governance and corporate socialresponsibility. Her eyes are on J Sainsbury plc, a leading UK food retailer, which hasrecently been the target of unsuccessful takeover bids. Although Sainsbury’s share priceincreased sharply in 2007 amid takeover talks, it plummeted months later when noagreement was reached and further tumbled during the credit crisis. Further speculation that the firm may be acquired has led to more share price fluctuations in 2009.

The CEO believes that J Sainsbury is a risky investment given the economic outlook for theUK and the fierce competition in the industry but certainly good value for money and a goodmatch for her company that has particular skills and capabilities. These can be used toenhance the target’s value through boosting its sales’ growth by a further (over and abovethe forecasted growth for the standalone company) 3% in 2011 and 1% for each of the next3 years. Of course there is always uncertainty associated with such forecasts, particularlygiven the ambiguity of economic forecasts during the recovery. A relatively safe prediction isthat your company can contribute reducing the target’s predicted cost of sales/sales ratio by#p#分頁標題#e#
1% and its administrative costs/sales ratio by about 20%, starting in 2011. The CEO alsofeels that if J Sainsbury plc is currently to some extent undervalued then its shareholdersmay be reluctant in selling their shares unless they are ‘dazzled’ by the offer and thecorresponding premium.

The CEO asks you to produce a detailed report to be presented to the next meeting of theBoard of Directors advising whether your company should formally consider bidding for JSainsbury. She reminds you that two of the non-executive directors are top professors offinance and are always very critical of decisions not reflecting the latest academic thinkingand other empirical evidence/analysis.

Requirement
You are required to write a report for consideration at the next meeting of the Board of
Directors. The aim of your report is to make clear and well-argued recommendations supported by relevant academic literature and other evidence. Your report should be structured into the following sections:
1. Motives – This section should include a detailed discussion of the main motives for the proposed acquisition supported by the latest academic literature and advances within the industry, with an emphasis on the arguments that the company should use to present such a bid to its shareholders. [20 marks]
2. Valuation - You need to advise the company about Sainsbury’s valuation and whether it can offer the company value for money. Clearly demonstrate calculations, assumptions and scenarios. As part of your answer, you also need to draw the Board’s attention to any benefits, risks or problems associated with your chosen methods of valuation. [40 marks]
3. Financing – This section should include a critical evaluation of the various alternatives of financing this bid and the potential effects of using each of these alternatives in this case. [25 marks]
4. Recommendations – This should include a clear and concise list of recommendations supported by appropriate arguments based on the previous analysis in the report, and could also include any other relevant information that you deem to be useful for the Board to consider. [15 marks]
N.B.:
(i) All calculations must be fully explained and based on the most recent availableinformation. You are advised to visit Sainsbury’s website, where you can find thecompany’s Annual Report in addition to other relevant information.
(ii) All arguments must be critically evaluated on the basis of the latest academic literature and anecdotal evidence. The use of literature must be fully referenced and a reference list must be provided at the end of the assignment.
This is an individual assignment
Overall word limit, 3000 words maximum (excluding tables/figures)
Assignment Weight: 80% of the total final assessment mark
YOUR COMPLETED ASSIGNMENT MUST BE SUBMITTED NO LATER THAN 15:00 ON FRIDAY 30 APRIL 2010
澳洲留學生dissertation網#p#分頁標題#e#Assignments must be typed or word-processed on A4 paper using 1.5 or double spacing and with margins of 2-3 cm. Pages should be numbered and stapled together in the top left hand corner. The word count should include all the text (plus endnotes and footnotes), but exclude diagrams, tables, bibliography, references and appendices.
PLAGIARISM and COLLUSION
Students suspected of plagiarism, either of published work or work from unpublished
sources, including the work of other students, or of collusion will be dealt with according to University guidelines.
You will be also required to submit an electronic copy of your assignment which will be put through the plagiarism detection service.