Assignment Questions

The Acquisition of Conrail (A)

1. Why does CSX want to buy Conrail? How much should CSX be willing to pay for it?

2. Analyze the structure of CSX’s structure for Conrail:

a. Why did CSX make a two tired offer? What effect does this structure have on

the transaction?

b. What are the economic rationales for and the takeover implications of the

various provisions in the merger agreement (i.e. no-talk clause, lock up options,

break-up fee, and poison pill shareholder rights plan?

3. As a Conrail shareholder would you tender your shares to CSX at $92.5 in the first stage

offer?

The Acquisition of Conrail (B)

1. Why did Norfolk Southern make a hostile bid for Conrail?

2. How much is Conrail Worth? In a Bidding war, who should be willing to pay more

Norfolk Southern or CSX?

3. Why does CSX refer to Norfolk’s bid as a non-bid? What should Norfolk do as of Mid-

January 1997?

4. As a shareholder, would you opt out of Pennsylvania antitakeover statute? What do the

capital markets expect will happen?

5. What are the costs and benefits of regulating the market for corporate control through

statutes like Pennsylvania anti take over law?

 MW Petroleum (A)

1. Evaluate Amoco’s and Apache’s corporate objectives and strategies. Is it reasonable to

expect that the MW properties are more valuable to Apache than to Amoco? What

sources of value most plausibly account for the difference between buyer and seller?

2. Structure and execute a DCF valuation of all the MW reserves using APV. How much

are the reserves worth? Is your estimate more likely to be biased high or low? What are

the sources of bias?

3. How would you structure an analysis of MW as a portfolio of assets-in-place and

options? Specifically, what parts of the business should be regarded as assets-in-place

and which as options?

4. Execute the analysis you structured in Q3, beginning with the assets-in-place. How

risky are the assets that underlie the options’ i.e. how would you estimate standard

deviation for each? How much is the portfolio worth?

5. Assuming a sale goes through, how does Apache exercise each of the various options?

When should it do so?

 Tata Steel (A): The Bid for Corus

1. Is Corus a good leveraged buyout candidate?

2. What are the prospects for the global stell industry?

3. What are the motivations, options and opportunities of the two companies?

4. Do the analyst projections in Exhibit 19 make sense to worth you?

5. How does Corus’ projected debt affect its valuation?

6. How does the cross-border nature of the Corus deal affect the valuation of the firm?

7. How much is Corus worth? How much would you bid?

8. If you were Tata Steel would you do the deal?

9. To whom is Corus worth more- Tata Steel or CSN?

Financing Strategy at Tata Steel

1. Why does TSL need to raise Capital? Explain?

2. What securities make sense for TSL in early 2011? Why?

3. How has TSL performed in the recent past?

4. How would you explain the company’s choice of securities in the recent years?

5. In light of the facts presented in the case would you invest in the company? Why or

Why not?

6. As Anuj what recommendation would give? Why?

7. Undertake a multiples valuation of the company’s shares using the data in the case.

What does your analysis suggest?

8. Value the company’s equity by the sum-of-the-peers valuation methodology.

 Assume the following for your analysis:

EBITDA (Tata Steel) Rs. 125,626m

EBITDA (Corus) Rs. 41,23 m
EBITDA (Asian subsidiaries) Rs. 3,842 m
Net Debt Rs. 416,029 m
No. of Shares outstanding 914.85 m
Exchange rate $1 = Rs. 45

Optional Question
9. Value the company by the free cash flow valuation methodology. Assume the
following:

Risk Free Rate = 7%

Market Risk Premium = 9%

Beta = 1.12

Cost of Debt = 11%

Tax rate = 30%