Monmouth Inc - HBR Case Study

Follow this link to HBRfor Monmouth Case. Analysis of the same is as below:

Robertson was attractive target to Monmouth due to following reasons:

1. Growth rate: Robertson has been growing at 2% which is well below the industry average of 6% 
2. Cost side: Robertson cost of good sold can be reduced. Operating and selling cost is high 
3. 75% industrial 25% consumer for Roberston but Monmouth was completing opposite 

When Simmons made the offer (of USD 44) to Robertson, Monmouth (of USD 42 all cash offer) did not make counter offer.

NDP was friendly acquirer (i.e. whiteknight). NDP's offer:

1. All stock offer exchange rate 5 : 1.. NDP's share price 4, value USD 53 
2. Robertson's 5Lacs share would become 1 lacs and NDP, would have controlling stake 
3. NDP share no dividend record... and kind of worthless... 

Simmons' offer:

1. All cash offer USD 42 per share. Premium 40% over CMP USD 30 
2. Since NDP offer were better, it would lead NDP to have controlling stake.. but Simmon do not want NDP's share.. and at the same time Simmon could not get the controlling stake.. 
3. Simmon reached out to Monmouth to save them... 

Monmouth never acquire through hostile route in history and they do not want to break the history. Monmouth have to offer fair price to Simmon's (existing shareholder) and to other shareholder..

Learning from the case:

1. DCF valuations
2. Earning valuations
3. Protecting EPS for both buyer and seller
4. Swap rate