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.
Book Value as Reported
Book Value adjusted for ECC Sale
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)
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.