I need help in calculating a hypothetical acquisition purchase price supposing that Dick´s Sporting Goods is acquiring Hibbett Sports. I need to include a base purchase price and the maximum purchase price the firm would be willing to pay. Also, I need help in determining how Dick´s will operate after the merger, and how the deal could be financed.
In this scenario Dick´s Sporting Goods is the main company and Hibbett Sports is the competitor (Dicks´s is acquiring Hibbett Sports).
Since the annual reports are too heavy to upload, these are the investor relations websites for both companies, in which the annual reports can be downloaded:
Investor website for Dicks Sporting Goods:
Investor website for Hibbett Sports:
http://phx.corporate-ir.net/phoenix.zhtml?c=78137&p=irol-irhome© BrainMass Inc. brainmass.com October 25, 2018, 9:11 am ad1c9bdddf
You should see the attachment.
For Hibbet Sports the free cash flow is different for each year between 2009 and 2013. However, the difference between the 2009 figure and 2013 is (65.2 minus 25.3) million dollars equals 39.9 million dollars. If this figure is divided by five, ...
This solution explains acquisition price analysis of Dicks Sports and Hibbett Sports . The sources used are also included in the solution.
Acquisition & Merger Analysis
Please use the attached Excel file templates by Alfred Rappaport for the analysis:
OldPro Corp. is a firm with $100 million of sale in a mature industry that is very competitive. The firm is considering the acquisition of FastGrow Inc., a firm with patents in a new technology related to OldPro's market segments. OldPro believes that there would be considerable synergies from the merger.
Keep in mind that no shareholder value can be created beyond a ten-year horizon
Here are key value drivers for the two companies, apart and merged.
Driver OldPro-alone FastGrow-alone Merged
Base sales ($ '000) $100,000 $10,000 $110,000
Sales growth rate 8% 25 % 13 %
Operating profit margin 4 25 % 15 %
Fixed + work. capital inv. rate 15 % 25 % 20 %
Cash tax rate 40 % 35 % 36 %
Cost of capital 8 % 17 % 11 %
Market securities ($ '000) $15,000 $500 $6,000
Debt ($ '000) $35,000 $2,000 $50,000
Shares outstanding ('000) 5,000 1,000 6,500
a. What are the valuations of OldPro Corp. and FastGro Inc. as standalone firms based on the SVA Model?
b. What is the estimated value of the merged firm?
c. What is the estimated value created by the merger?
d. What is the maximum acceptable purchase price?
e. What is the value created for the buyer(OldPro Corp.) if the purchase is 60 million?
f. If OldPro Corp has to pay a 40% premium over the standalone value of FastGrow for the acquisition to go forward, would you recommend this merger?