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Takeover of the Norton Co Case Solution

Case ID: 291002
Solution ID: 3377

Words: 1286

Price: $75

Case Solution

After ten years of ordinary functionality in 1990, Norton Co. expected to experience increased sales in the near future. Despite this, Norton is aiming for low developing industries and a below-expected earnings statement in early 1990 has adverse earnings predictions by brokerage houses. BTR, a large and a famous British multinational, is contemplating to takeover Norton but is concerned over a number of matters. The case looks present a real-life scenario and offers the minuscule details that enable students to understand how companies like BTR perform valuation calculations for possible takeovers and assesses how the takeover would influence BTR's functionality and operations, and how it might ward off other offers if it makes a substantial proposal.

Excel Calculations

Book Value as Reported

Book Value adjusted for ECC Sale

Market Value

Norton EPS x BTR P/E Ratio

Norton EPS x BTR P/E Ratio adjusted for ECC

Maximum Price without hurting BTR EPS

Present Value of Cash Flows (Zero Growth)

Present Value of Cash Flows (10% ST growth, 5% LT growth)

Questions Covered

On spreadsheets using active cells wherever needed, reproduce all 7 alternative valuation numbers from the last three pages of the packet.

Evaluate Norton Co. as a takeover target by BTR plc relative to BTR’s strategy as formulated in the mid-1960s.

Owen Green, Chairman of BTR “anticipated that Norton would fetch full price.” Discuss why this was so.

In light of the valuation estimates of Norton in the last three pages of the packet, how should BTR formulate/evaluate the magnitude and financing of its bid for Norton Co.