AEM222 - case 4 - Adam Schulman Group 29 Land's End Case...

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Adam Schulman – Group 29 Land’s End Case Analysis March 10, 2006 Problem : Land’s End is at a crossroad along its life’s course which has spanned almost fifty years. Over the last few years it has struggled in maintaining positive growth in profits, although recently it has begun a climb towards renewed growth and prosperity. Despite this fact, the primary stock holder and owner of the company, Gary Comer, is considering selling some of his shares in the company. So the issue at hand is dual-parted. The board members have to simultaneously address Comer’s desire to reduce his holding and find a way to pave a smooth road for Land’s End in the future. Possible Solutions : First, the company can consider a leveraged buyout which would be an attempt by employees, the management team, or a group of investors to purchase the organization. They would do this by borrowing money with which larger portions of the company in the form of stocks could be obtained. This action would most likely result in the sale of the majority of Gary Comer’s stocks, replacing him as majority share holder. This would satisfy his desire to reduce his control of the company and at a premium stock price. At the same time the new majority owners would take control of a company that would now be in much debt as a result of the buyout. This solution would satisfy Comer in that he is making a significant amount of cash off of his shares. However, the future of his company would be hazy, and Land’s End would be in a worse position than it was previous to the leveraged buyout due to the now-present debt brought upon the firm by the LBO. Second, the company can consider a buy-back of outstanding shares. This would result in an increase of shareholders’ percentage ownership of the company. Such an action strengthens internal control and stability of the firm. However, Comer, in this case, would merely be earning
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