syopsis - low though being a highly leveraged company •...

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The following  attractiveness’s or unattractiveness’s for taking over Commerce Bancshares Inc.'s by a leveraged buyout firm are as follows: ATTRACTIVENESS It serves millions of customers and corporate firms too. It is one of the market leadersafter BOK Financial Corp. It has a total market capitalization of $ 3.61 Billion It has a good brand name and operations are widely spread. The beta of the stock of Commerce Bancshares Inc. is 0.47 which makes it a defensive  stock and is a good proposition to buy the firm. The price earnings ratio of the company is 15.29 times, which shows that the firm is  trading at a very high multiple of its earnings and people have lot of faith and expectation  from the company. UNATTRACTIVENESS The average return on equity of Commerce Bancshares Inc. is just 12% which is a very 
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Unformatted text preview: low though being a highly leveraged company. • As said above, Commerce Bancshares Inc. is a highly levered firm with a debt equity ratio of 8.14: 1 which is very high. • The assets are mostly financed through debt and which pose a threat for the company in times of financial crisis. • The book value per share is $ 23.73 which is a very low as per banking industry standards. As given in the case, the buying company is a weighing a leveraged buyout option, therefore the plan to take over Commerce Bancshares Inc. should not be proceeded with as Commerce Bancshares Inc. itself is a highly levered firm and by making a leveraged buyout of the same, the overall position of the new consolidated firm will be very risky....
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This document was uploaded on 06/23/2011.

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