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    Gulf Oil Takeover

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    kumar.kunal
    The company generated $2,848,000 in EBIT in 1983. After accounting for interest, taxes, depreciation, and capital expenditures of $994,000, the company's free cash flow was $714,447. The weighted average cost of capital was calculated to be 15.785%. Based on the given financial information and assumptions, the maximum bid price per share that the company could offer for Kohler was determined to be $72.

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    Gulf Oil Takeover

    Uploaded by

    kumar.kunal
    2K views9 pages
    The company generated $2,848,000 in EBIT in 1983. After accounting for interest, taxes, depreciation, and capital expenditures of $994,000, the company's free cash flow was $714,447. The weighted average cost of capital was calculated to be 15.785%. Based on the given financial information and assumptions, the maximum bid price per share that the company could offer for Kohler was determined to be $72.

    Original Description:

    Merger and Acquisition - Gulf oil takeover KKR Maximum Bid

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    The company generated $2,848,000 in EBIT in 1983. After accounting for interest, taxes, depreciation, and capital expenditures of $994,000, the company's free cash flow was $714,447. The weighted average cost of capital was calculated to be 15.785%. Based on the given financial information and assumptions, the maximum bid price per share that the company could offer for Kohler was determined to be $72.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    2K views9 pages

    Gulf Oil Takeover

    Uploaded by

    kumar.kunal
    The company generated $2,848,000 in EBIT in 1983. After accounting for interest, taxes, depreciation, and capital expenditures of $994,000, the company's free cash flow was $714,447. The weighted average cost of capital was calculated to be 15.785%. Based on the given financial information and assumptions, the maximum bid price per share that the company could offer for Kohler was determined to be $72.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 9

    Free Cash Flow for 1983

    Cash Flow Item


    Revenue due to production of oil
    Less Expenses
    Production Cost
    Wellhead Taxes
    Exploration Expense
    Depreciation
    Other Operating Expenses

    Amount
    6503.00
    -911.00
    -792.00
    -601.00
    -1000.00
    -351.00

    EBIT

    2848.00

    Interest
    EBT

    274.92
    2573.08

    Calculate
    taken f

    Tax rate ca
    EBIT
    Tax
    EBT
    Depreciation
    Change in Net Working Capital
    Gross Capex
    FCF

    2848.00
    2139.53
    708.47
    1000.00
    0.00
    994.00
    714.47

    Calculation of Cost Of Capital, WACC


    Debt
    Equity
    Beta
    Kdebt

    From 1 ye

    Unsucc
    incu

    2291
    6116.1
    1.15
    12

    Kequity

    20.58

    Krisk free

    10.46

    Krisk premium

    8.8
    0.2725077613
    0.7274922387
    15.7852594278

    Weight of Debt
    Weight of Equity
    WACC

    Valuation Of Share
    Enterprise Value from Operating Assets
    Long Term Assets

    4526.1794310329

    FCF/WA

    Net Properties
    Investment in Afiliates
    Deferred charges and other assets
    Total long term Assets

    14090
    608
    613
    15311

    Long Term Debt and capital leases


    Deferred taxes
    Other Liabilities
    Minority Interests
    Total long term Liabilities

    2291
    2651
    355
    783
    6080

    Enterprise Value from Non Operating Assets

    9231

    Net Enterprise Value


    Number Of outstanding shares
    Max Allowed Price per share

    Maximu

    13757.1794310329
    165.3
    83.2255258986

    Calculation of Maximum Bid Price for Kohler


    70
    71
    72
    73
    74
    75
    76
    77
    78
    79
    80

    5785.5
    5868.15
    5950.8
    6033.45
    6116.1
    6198.75
    6281.4
    6364.05
    6446.7
    6529.35
    6612

    SUMMARY
    Company
    ARCO
    Kohlberg
    SOCAL

    Maximum Bid
    $75
    $72
    $83

    694.26
    704.178
    714.096
    724.014
    733.932
    743.85
    753.768
    763.686
    773.604
    783.522
    793.44

    Assumptions/Case Da

    Calculated at a rate of 12%,


    taken from historic data

    Number of shares(mill)
    Interest rate(%)
    Tax(mill)
    Long term debt(mill)
    Tax rate
    Current Assets(mill)
    Current Liabilities(mill)
    Gross Capex(mill)
    Beta
    Krisk premium
    Krisk free

    Tax rate calculated as 75% from


    Exhibit 1
    From 1 year B/S data, assumption is that
    Change in NWC is 0
    Unsuccessful Exploration expense of 601 is already
    incurred, hence amount remaining from 1595

    FCF/WACC

    Maximum Bid For SOCAL, $83

    Maximum Bid For Kohlberg, $72

    mptions/Case Data

    ready
    95

    82.65
    12
    1933
    2291
    0.7512397594
    5653
    4756
    1595
    1.15
    8.8
    10.46

    Cash Flows
    Year
    Number of Barrels
    Price Per Barrel
    Revenue
    Production Costs
    Total

    165.3
    37

    Debt
    Equity
    Beta
    Kd
    Ke
    Krisk free
    Krisk premium
    WACC

    1984
    290
    22.42
    6501.8
    6501.8
    5566.075

    2291
    6116.1
    1.15
    13.5
    20.58
    10.46
    8.8
    16.811218

    1985
    290
    22.42
    6501.8

    1986
    290
    22.42
    6501.8

    1987
    290
    22.42
    6501.8

    1988
    290
    22.42
    6501.8

    1989
    290
    22.42
    6501.8

    1990
    290
    22.42
    6501.8

    22.42
    0

    6501.8
    5566.075

    6501.8
    5566.075

    6501.8
    5566.075

    6501.8
    5566.075

    6501.8
    5566.075

    6501.8
    5566.075

    0
    0

    27%
    73%

    1991

    1992

    1993

    1994

    22.42
    0

    22.42
    0

    22.42
    0

    0
    0

    0
    0

    0
    0

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