This is a Darden case study. Tiffany & Company was the top U.S. luxury jewelry brand, earning more than $2.6 billion in profits through 167 physicalshopsinternationally and from catalog and online sales. For almost a period of 170 years, Tiffany had administered and supervised its brand. In February 2007, a hedge fund, Trian Fund Management LP, made public that it had purchased a 5.5% share in Tiffany, and had thus become its prime stakeholder. Trianwas under the impression that Tiffany was underrated and gave statement that it wanted to aid the firm "enhance its earnings per share by tackling different functional and tactical problems.” In reply, Tiffany began to think of various ways in which it could boost shareholder value.
Value of the Firm and Equity
Income Statement Data
Balance Sheet Data
FREE CASH FLOW
Intrinsic Equity Value - In Thousands
Intrinsic Debt Value
UNLEVERED FREE CASH FLOW
Value of The Firm
Firm value using Comparables
Book value Per Share
Value Of the Equity
Value Of the Debt
Value of the Firm
Average Value Of the Firm
Worth more tha uFCFF
1. What is the Intrinsic Firm Value of Tiffany? What is the Intrinsic Equity Value of Tiffany?
2. Why do customers buy from Tiffany? Is the “need or desire” different for an engagement ring from Tiffany’s in New York than for a sterling silver bookmark bought from a catalogue as a corporate “give away?” How do your answers to these questions impact the comparables you choose to estimate a PE ratio?
3. Why are the investment bankers so focused on comparable data? You are Chaney. Should this concern you?
4. What is the “Tiffany franchise” worth, over and above the uFCFF?
5. At what price per share should Tiffany take its equity public?
6. Calculate how much is Tifanny worth using the comparables? Which one would you use and why?