...Blaine Kitchenware Inc. Case Analysis: Muhamad Fahad Sohail Table of Contents Blaine Kitchenware capital structure and payout policy 2 Advantages and Disadvantages of share repurchase move 2 New proposal by CEO TO repurchase stocks from the market and its analysis 3 Recommendation to the CEO as a family member and as an independent consultant 3 How does the proposal differ from paying a special dividend of $4.39 share instead? 4 Blaine Kitchenware capital structure and payout policy Blaine Kitchenware Inc.’s current capital structure is not efficient. The incentive for any public company and Board of Directors should be the increase the value of firm through projects, increased earnings per share value, and the lowering of costs. One way many firm’s effectively increase the value of the firm is to minimize the weighted average cost of capital. The weighted average cost of capital is the costs of a firm in the form of debt and equity. Since Blaine Kitchenware is a public company and issues shares, they have an established capital structure model. By taking on no debt, the value of the firm is unlevered and the firm does not gain the advantage of the interest tax shield. It is because Blaine Kitchenware Inc. has chosen to finance projects by the selling of shares and has not made use of debt issuance that the firm’s value is not fully maximized and the weighted average cost of capital is not minimized. If Blaine Kitchenware Inc. took on debt, the value of the...
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...Ahmad Mohammad Analysis of Blaine Kitchenware Inc. case Brief Background Blaine Kitchenware Inc., a mid-sized producer of branded small appliances primarily used in residential kitchens, has a very conservative practices regarding taking debt. It only took debt twice in its entire history. An investment banker prompted the idea of repurchasing some of the company’s stocks to the CEO Mr. Dubinki. The CEO is not sure whether the repurchase will benefit the company or not. Problems with Blain current capital structure The main problems that I have noticed in Blain’s capital structure are * Heavy reliance on equity. * Zero debt * Surplus of cash Even though there are not problems at all with the company’s profitability, those problems above does not allow the company to operate at the maximum efficiency. Zero debt does not allow the company to benefit from tax shield. The firm is has extremely conservative practices regarding financing and they have only took debt twice in its entire history. On the other hand, heavy reliance on equity reduces the ROE, making it significantly lower that those of other competitors. Regarding the payouts, the dividend payout ratio had a dramatic increase from 35% in 2004 to 52.9% in 2006, which raises questions about the sustainability of cash growth. At the same time the Earning Per Share ratio (EPS) from 1.29 to 0.91. this is because there is a huge amount of shares available compared to the company’s net income. Actually...
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...Poopology! Sucker! ------------------------------------------------- Early life [edit] Blaine was born and raised in Brooklyn, New York and is of Puerto Rican descent on his father's side, and Russian Jewish on his mother's. Blaine's mother, Patrice Maureen White (1946–1995),[2] was a school teacher living in New York, and his father William Perez was a Vietnam veteran. When he was four years old, he saw a magician performing magic in the subway. This sparked a lifelong interest for Blaine.[3] He was raised by his single mother and attended many schools in Brooklyn. When he was ten years old, his mother married John Bukalo and they moved to Little Falls, New Jersey,[4] where he attended Passaic Valley Regional High School.[5] He has a half-brother named Michael James Bukalo. When he was 17 years old, Blaine moved toManhattan, New York.[6] ------------------------------------------------- Stunts and specials [edit] Street Magic and Magic Man [edit] On May 19, 1997, Blaine's first television special, David Blaine: Street Magic aired on the ABC network. According to the New York Daily News, “Blaine can lay claim to his own brand of wizardry. The magic he offers in tonight’s show operates on an uncommonly personal level.”[7] When asked about his performance style, David explained, “I'd like to bring magic back to the place it used to be 100 years ago.”'[8] Time magazine commented, "his deceptively low-key, ultracool manner leaves spectators more amazed than if he'd razzle-dazzled...
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...Robert H. Smith School of Business BUFN 740: Capital Markets Fall 2014 Tuesdays and Thursdays Aug 25, 2014--Oct 13, 2014, 1:00pm—2:50pm, VMH 1330 Instructor: Yajun Wang Office Hours: Tuesdays and Thursdays 5:00pm-6:00pm Office: VMH 4453 E-Mail: ywang22@rhsmith.umd.edu, Office Number: (301) 405-3412 Teaching Assistants: CP Sessions: Qi Xu, qi.xu@rhsmith.umd.edu (hold help sessions in CP, grade all homeworks and cases for session 0501, and grade hw #1,2,3 and case #1,2,3 for session 0502) DC Sessions: Julia Zhu yantong.zhu@rhsmith.umd.edu (hold help sessions in DC, grade all homeworks and cases for session DC C1, and grade hw #4, 5, 6,7 for session 0502) Help Sessions: Mondays: 7:30-8:30pm @VMH, Room: VMH 1505 Mondays: 5:00-6:00pm @DC, Room: C2 Course Description This course covers modern theories and techniques for investments and asset pricing. The main topics covered are: portfolio theory, pricing models, market efficiency, fixed income investment, forwards and futures, and options. Canvas: Course materials such as lecture notes, required homework assignments, worked solutions to problems, and other useful information will be available on the course web page at Canvas: https://myelms.umd.edu/ Course Materials The following textbook is required and will be used throughout the course: Investments, by Zvi Bodie, Alex Kane and Alan J. Marcus, 9th Edition, published by McGraw Hill. Henceforth this book will be referred to as BKM. We will cover three cases in this course. ...
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...Decision of Repurchase- The dilemmaBlaine Kitchenware Inc. is faced with a dilemma as to not go for the suggested buyback or to payheed to the investment banker and repurchase its own shares. And also if BKI does repurchase itsshares, should it only partially repurchase the market float or should it go for complete buyback ( inwhich the Blaine family becomes the owner of all the remaining shares).Also they have to think of the effect of repurchase on the various factors like the risks involved inraising a debt for repurchasing (especially when the company is by and large very conservative andit is debt free), its acquisition plans ( which is mainly done by cash and BKI stocks), the earningsper share, dividend per share (which will become more flexible as now the shares will be with thefamily shareholders only and thus a reduction in dividends can be easily accepted), ownershipstructure, capital structure and of course the reputation of the company in the market after thebuyback.Therefore, we can consider three scenarios and then analyze the effect of these on the abovementioned factors and then decide whether Blaine should follow them keeping in mind the existingshareholders' perspective as well as Blaine's controlling family perspective.These scenarios are:1. BKI should not go for any buyback of shares.2. BKI should go for only partial repurchase, by using only its cash and cash equivalents andmarketable securities and not raising any debts.3. The company should buy its entire...
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...Blaines Kitchenware Blaine kitchenware has occupied the industry for a over 80 years and continues to gain control in the market it occupies. As the CEO of the company, Mr. Dubinski is faced with the difficult decision of determining what is the best for the family company. The following questions will address what decision is the optimal and why it is beneficial for BKI. * Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? The main dilemma in the case is whether Blaine Kitchenware’s should choose to repurchase its own shares or not. If Blaine’s Kitchenware does repurchase its shares, they must consider whether to partially repurchase the market float or go for a complete buyback where Blaine’s family would become the owner of all the remaining shares. They also have to consider of the effect of the repurchase on various factors like the risks involved in raising a debt especially when they are large, very conservative and debt free. They should also consider things such their acquisition plans, their earnings per share and their dividend per share, ownership structure, capital structure and of course the reputation of the company in the market after the buyback. With this in mind we can consider a few situations and then decide what Blaine should do, keeping in mind the perspective of both the existing shareholders' as well as Blaine's c family’s. Since no debt is being raised, if all the cash & cash securities...
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...Blaine Kitchenware Case Study Blaine Kitchenware has occupied the industry for over 80 years and continues to gain control in the market it occupies. As the CEO of the company, Mr. Dubinski is faced with the difficult decision of determining what is best for the family company. The following questions will address what decision is the optimal and why it is beneficial for BKI. Ans. 1) The main dilemma in the case is whether Blaine Kitchenware’s should choose to repurchase its own shares or not. If Blaine’s Kitchenware does repurchase its shares, they must consider whether to partially repurchase the market float or go for a complete buyback where Blaine’s family would become the owner of all the remaining shares. They also have to consider of the effect of the repurchase on various factors like the risks involved in raising a debt especially when they are large, very conservative and debt free. They should also consider things such their acquisition plans, their earnings per share and their dividend per share, ownership structure, capital structure and of course the reputation of the company in the market after the buyback. With this in mind we can consider a few situations and then decide what Blaine should do, keeping in mind the perspective of both the existing shareholders' as well as Blaine's family’s. Since no debt is being raised, if all the cash & cash securities plus the market securities are used for the buy-back, his family may like this option. Their management...
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...Introduction Victor Dubinski, CEO of Blaine Kitchenware, Inc. had recently been made aware that a group of private equity investors made inquiries about a possible acquisition of Blaine. Dubinski knew that the family had absolutely no interest in selling, but he was still perplexed about how the private equity group could unlock some inherent value within their company. They wanted to use the cash on Blaine’s balance sheet and new borrowings to purchase all of Blaine’s outstanding shares at a price higher than its current stock price. After some thinking, he began to think about how he could complete a repurchase decision himself and thus stave off an unsolicited takeover. Blaine Kitchenware is a mid-sized producer of branded small appliances primarily used in residential kitchens. It was originally founded in 1927 as the Blaine Apparatus Company and produced then-novel electric home appliances. By the year 2006, Blaine had achieved a 10% share of the total $2.3 billion U.S. market for small kitchen appliances. Recently Blaine began expanding into foreign markets. A majority of their revenue was generated from shipments to U.S. wholesalers and retailers, but 35% of their sales came from Canada, Europe, Central, and South America. By the end of 2006, Blaine’s balance sheet was the strongest in the industry. They were debt-free and held $231 million in cash and securities. More recently, the company’s largest uses of cash had been dividends paid out to their shareholders...
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...Blaine Kitchenware Inc. Take-Home Case Assignment BSAD 342 Prof. Vishwakarma Grady McQuillan Joe Mackay Mitch Chown Alessandro Galeone Discussion questions • Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not? The current capital structure and payout policies for Blaine’s Kitchenware Inc in our opinion is not the most appropriate. The firm’s structure is invested primarily in equity, for the most part (other than twice in their history) not incurring any debt. Although the company originally seemed to pride itself in not incurring debt it’s evident that it has long-term affects on the value of the firm. Whether they considered that less debt would provide them with less risk or not, the fact is that they are not maximizing the value of their firm completely by staying away from debt financing. Although risk will increase when their debt increases, debt financing will lower the cost of capital primarily due to tax reduction. The firm will never reach their full potential by acting this conservative with their financing, and in return this affects their shareholders and payout policies. As stated in the case, “Despite the company’s profitability, returns to shareholders had been somewhat below average”. This is due directly to their net income and the amount of book equity. Subsequently, Blaine’s ROE in 2006 was extremely lower than that of its peers. This creates a big...
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...the most corrupt in history Uses Spoil System 1872 credit mobilier: stock given to key members of congress to avoid a bribery investigation vice president Colfax and future president James Garfield implicated 1876- the whiskey ring exercise tax money embezzled by members of grants administration including secretary 1869-1877 wide spread theft/ embezzlement Corruption in the cites the rise of “ political machines” – organization that traded favors and services for votes provided immigrants with basic services ; embezzled or stole millions of $$$ from State and local governments Tammany hall of NYC Boss tweed William Marcy “ Boss Tweed Ran Tammany hall 1880 presidential election republicans Half breeds – Sen. James g Blaine Stalwarts Sen. Roscoe Conkling NYC Compromise –James a Garfield Chester a author VP 1881 James Garfield Assassinated! Charles Guiteau: I am a Stalewart and Arthur is now pres. Chester Arthur the fox in the chicken coup?...
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...Chapter 23 Outline Politics in the Gilded Age 1. 10 Important Facts a) Ulysses S. Grant - He was a great soldier but an inept politician. Republicans would wave “the bloody shirt” for Grant which was reviving gory memories of the civil war. Grant had won with 214 electoral votes to 80 votes for Seymour. b) James G. Blaine - He was from Maine and was a radiantly personable congressman with an elastic conscience. Blaine was one of the late 19th century's leading Republicans and champion of the moderate reformist faction of the party known as the "Half-Breeds". c) Burly “Boss” Tweed – He employed briery, graft, and fraudulent elections to milk the metropolis of as much 200 million dollars. Tweed’s luck ran out when the New York Times discovered evidence in 1871 and published. He then died behind bars. d) Democrats – They had a solid electoral base in the south and in the northern industrial cities, teeming with immigrants and controlled by well-oiled political machines. e) Republicans – Their strength laid largely in the Mid-West and the rural and small-town Northeast. Important blocs of republicans’ ballots came from the GAR- a politically potent organization with many Union veterans of the civil war. f) Grover Cleveland – He was a solid lawyer of 47 and was the first democrat to take the oath of presidential office in twenty...
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...CASENI N etFlix.com, Inc. In July 2000, Reed Hastings, chairman ,md CEO of NetFlix.com, Ine., faced a criticaI deci:;jon. Thrl'C months earlier, following one of tl1l' worst episodes O!l record for the NASDAQ market, NetFlix had submitted it:; 5-1 filing for its initial Pllblic offering (Iro).! A:; il rl'sult of thl' market downturn, many Internet companies had been forced to withdraw their 1['0s. Invl,:-;tment bankers indicated to Hastings that NetFlix would 11(.'Cd to show positive cash flows within a twdw-month horizon in order to have a succes.,,,flll offering. Hastings knew that NetFlix was at a crucial stage. With revenU($ doubling evcry six months, NetFlix was enjoying tremendolls stlccess. But continucd succcss depcnded on thl' company's ability to sustain triple-digit growth (or the fOfesceable future. Soon, Hastings would have to decide whether or not to proceed with the company's anticipated IPO. Hastings askl..'\l Barry McCarthy, the chicf finnnciai officer, to re-('vnluate the cash flow requircments of thc company's currcnt business pian, to suggest modificùtions that would improvc the company's projected cnsh flows, and to makc ù rccommcndation on whether the company should go forward with its plùnned offcring. As McCarthy rcviewed the existing NetFlix business model, hl' considered possiblc chùnges that might allow thc company to procccd with its planncd IPO ùnd yet sustùin thc typc of futtlrl..' growth that would be nccL,:-;sary for thc compùny to achieve...
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...4040 OCTOBER 08, 2009 TIMOTHY LUEHRMAN JOEL HEILPRIN Blaine Kitchenware, Inc.: Capital Structure On April 27, 2007, Victor Dubinski, CEO of Blaine Kitchenware, Inc. (BKI), sat in his office reflecting on a meeting he had had with an investment banker earlier in the week. The banker, whom Dubinski had known for years, asked for the meeting after a group of private equity investors made discreet inquiries about a possible acquisition of Blaine. Although Blaine was a public company, a majority of its shares were controlled by family members descended from the firm’s founders together with various family trusts. Family interests were strongly represented on the board of directors as well. Dubinski knew the family had no current interest in selling—on the contrary, Blaine was interested in acquiring other companies in the kitchen appliances space—so this overture, like a few others before it, would be politely rebuffed. Nevertheless, Dubinski was struck by the banker’s assertion that a private equity buyer could “unlock” value inherent in Blaine’s strong operations and balance sheet. Using cash on Blaine’s balance sheet and new borrowings, a private equity firm could purchase all of Blaine’s outstanding shares at a price higher than $16.25 per share, its current stock price. It would then repay the debt over time using the company’s future earnings. When the banker pointed out that BKI itself could do the same thing—borrow money to buy back its own shares—Dubinski had asked...
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...UNIVERSIDADE ESTÁCIO DE SÁ MBA EM GESTÃO FINANCEIRA E CONTROLADORIA Fichamento de Estudo de Caso Lidiane Regina Nogueira das Neves Trabalho da disciplina Fundamentos da Matemática Financeira e Estatística Aplicada Prof. Geraldo Gurgel Filho Itaituba – PA 2015 Estudo de caso: Blaine Kitchenware Inc.: estrutura de capital FUNDAMENTOS DA MATEMÁTICA FINANCEIRA E ESTATÍSTICA APLICADA Blaine Kitchenware Inc. REFERÊNCIA: LUEHRMAN, T. & HEILPRIN, J. Blaine Kitchenware Inc.: estrutura de capital. Boston, MA: Harvard Business School, caso LACC # 413-P02, 8 de Outubro de 2009. Os autores descrevem a atividade da empresa de capital aberto Blaine Kitchenware Inc. e em seguida fazem uma análise do seu desempenho financeiro e políticas financeiras. A BKI é uma empresa de médio porte, fabricante de eletrodomésticos para cozinhas residenciais, cuja “maioria das ações pertencia a descendentes dos fundadores da empresa, assim como a diversos trusts da própria família” (p.1). A Blaine tinha pouco menos de 10% do mercado e o setor cresceu apenas 3,5% anuais de 2003 a 2006 devido a concorrência com importados e preços agressivos dos hipermercados. Esta atuava em três segmentos: utensílios para preparo de comida, para cozinhar e para o preparo de bebidas, sendo os dois primeiros os de maior geração de receita. A empresa introduziu no mercado produtos com tecnologia “smart”...
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...TO: VICTOR DUBINSKI FROM: CLAUDIA ZHAO SUBJECT: REVIEW OF BLAINE KITCHENWARE DATE: February 9, 2016 Based on the analysis of Blaine Kitchenware’s capital structure, I recommend share repurchase. Stock repurchase would result in a change in firm value and stock price for Blaine Kitchenware, and it will also contribute to optimal debt capacity through allowing the firm to utilize tax deductible financing. Blaine currently faces many risks as a result of the surplus cash including takeover threat and inappropriate payout structure. Blaine Kitchenware’s current capital structure and payout policies are inappropriate for the following reasons. Blaine is currently over-liquid and under-levered and the shareholders are not maximizing their values as a result. Blaine is entirely financed by equity and none by debt, so there is no cash shield. The surplus of cash lowers the return on equity and increases the cost of capital. The large amount of cash will also make Blaine a target for acquisition, due to its lower enterprise value. The payout policies of Blaine is also unsustainable without share repurchases. Blaine’s earnings per share decreased from $1.29 to $0.91 from 2004 to 2006. However, the payout ratio had risen from 35 percent to 52.9 percent in the same time. In order for Blaine to maintain its current payout policies, numbers of outstanding shares must be reduced through share repurchasing. I recommend acquiring leverage and repurchasing shares. Advantages include...
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