lecture_mergers_521_2011_examples

lecture_mergers_521_2011_examples - A Six Pack of Mergers!...

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1 A Six Pack of Mergers!
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2 Merger 1
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3 Acquires MediaOne for $58B in 2000 (announced 1999) Cash-financed merger Who bears risk in this transaction? Two years later, AT&T effectively sells cable assets at a 50% loss
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4 Merger 2
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5 Koch-Georgia Pacific Koch Industries announces November 13, 2005 will acquire Georgia-Pacific for $13.2B ($48/share) at a 38.5% premium over the prior-day close of $34.65 Koch is the second largest privately-held firm in the U.S. (behind Cargill) at the time, thus cash-financed acquisition Georgia-Pacific produces paper products (32% of toilet paper market and 23% of paper towel market) Brands include Brawny towels, Dixie cups, & Quilted Northern Koch is a commodities conglomerate operates refineries and pipelines trades commodities manufactures pulp, paper, and fibers operates ranching business and produces fertilizer
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Why? Exploit economies of scope (vertical integration) Koch and Georgia-Pacific have had an ongoing relationship that has worked well (May 2004 Koch acquired two pulp mills from GP) Shield profits from gov’t by taking on more debt ($13.2 billion to buy out GP and also assuming $7.8B in GP’s outstanding debt), combined revenue of new company $80 billion
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lecture_mergers_521_2011_examples - A Six Pack of Mergers!...

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