Flinder Valves and control Inc. (FVC) is a renowned firm in the manufacturing of technical components related to the engineering field. Flinder is currently planning for its strategic acquisition by RSE International Corporation. After the depressing condition of 2008, Flinder Valves and control Inc. has decided to become a part of RSE internationals. The purpose of my report is to analyze the purchase price for the buyer and the seller with the help of the company’s valuation analysis. Flinder is currently trading at $39.75. There are 2,440,000 shares of stock outstanding. After agreeing upon a valuation, RSE and Flinder must also agree on how the deal will be done. The deal could be in cash, or RSE could give shares of its company in exchange …show more content…
First, I have analyzed the historical data and found out trends in the financial statements of the Flinder Valves and concluded that in recent years. The company’s revenues have increased by an average growth rate of 9% in 2007, which seems pretty logical because of the recent strong performance. The revenue is expected to increase at 21% in 2008 and 11% for the next following years. Based on the historical data, I found out the rate of Cost of Goods Sold over Sales was around 74%. General and Administration expenses were assumed to be around 6% of the sales. Other net income was 1% of the …show more content…
Then I computed enterprise value and the value of the shares on DCF basis. It comes up with the value per share is $26.25 per share which is also higher than the current trading share price of RSE company. Then I have analyzed potential post-merger synergies and economies of scale and found that both the companies will enjoy a premium over their current share prices because of the merger, based on the expected 5% inflation rate prevailing in the market. The exhibit #2 shows the DCF model of RSE and my