Case ID: 285053
Solution ID: 6549
Words: 1790
Price $ 75

Gulf Oil Corp Takeover Case Solution

Case Solution

Mesa Petroleum was attacking Gulf oil that pressurized the company to liquefy its assets. Gulf oil was faced with two alternatives. It had to either sell or privatize the firm. Suitors are expecting Gulf to sell out and are deciding their bids for the company.

Excel Calculations

Exploration and Development Data for Gulf and Socal

Selected Market Prices

 

 

WACC Calculation 

 Cost of Equity

 Cost of Debt

 Tax Rates

 WACC for Gulf

 WACC for socal

 

 

Gulf Value

 Value of Oil Reserves

 Value of Going Concern

 Offer/ Bid Price

 Maximum Price Socal can afford

 Gulf Liquiditation Value

 

 

Value Using Multiplies

 Enterprise Valye for Socal

 EV/ Sales

 EV/Producion Capacity

 EV/EBDITA

Questions Covered

1- What are reasonable multiples for comparing the relative values of SOCAL and Gulf? 

 

2- What is the maximum price Socal can afford to pay for Gulf? 

 

3- What changes in Gulf’s operations are needed to justify the above price? What is the value of the changes you propose? 

 

4- Compare the maximum price that Socal can pay for Gulf to Gulf’s market value before it became acquisition candidate. If there is a difference, try to explain it.