FIN449
Valuation #3 – M&A
In July 2012, LaCrosse Footwear, Inc., (BOOT) announced it was being acquired for $20 per share. Their stock had an
adjusted close of $10.98 prior to this news.
http://www.bizjournals.com/portland/blog/threads_and_laces/2012/07/already-big-in-japan-lacrosse-sale.html
http://www.oregonlive.com/playbooks-profits/index.ssf/2012/07/lacrosse_footwear_deal_hinged.html
http://finance.yahoo.com/news/law-firm-levi-korsinsky-llp-154400052.html
There are other sources of information about this action. You will need to research the issue thoroughly.
Turn In:
All pages should be neatly formatted & easily readable.
- 1 page detailing the computation of the historic unadjusted FCFF and FCFE for the past three years.
- 1 page detailing the historic FCFF & FCFE adjusted & recast to accommodate leases and other issues covered in
class.
- 1 page determining LaCrosse’s Ke, Kd and WACC, including the components of each. This must include beta
based on regression and a “bottom-up” computation. Make sure to list the comparable firms used for the
bottom-up beta and explain why each is appropriate.
- Analysis of the price offered showing the growth, cash flow and other assumptions the buyer is likely using to
value the firm at the offered price. Use a forecast of FCFF and of FCFE to arrive at the price offered for LaCrosse.
- 1 page discussing the LaCrosse’s situation. Address the following points:
 Who is the buyer, and what is their history & expertise?
 Is LaCrosse involved in a hostile takeover?
 What is the buyer’s motive?
 What expectations does the buyer have (based on your analysis above)?
 What aspects of their fiscal management make LaCrosse desirable for a takeover bid?
 What issues or problems does the buyer face from this offer?
 Do you believe the price offered is too high, too low or about right? Explain your answer.
Make sure to cite any references used in this discussion.
Additional information:
 Your basic approach should be to take the amount offered and determine what it is based on. For example, if
the equity is being purchased for $100/share and there are 200,000 shares, the total price is $20,000,000. We
know that P0 = CF1/(r-g), so the next step is to assume what the discount rate and growth might be. If r=15%
and g=5%, then CF1 = $2,000,000. Assume this is FCFE. Compare the assumed FCFE to what is likely based on
current performance, then determine what needs to change: Growth, risk, profitability, assets, liabilities, etc. to
make the computation work. Tie this to the practical things the buyer will need to do and predict what actions
they will take.