This premier retail jewelry company was bought from its parent, Avon, by a group of investors led by its own management in 1984. The company was highly leveraged, financially, and had to scramble to meet the cash flow and earnings requirements laid down by its lenders. Management effected a turnaround and decided to go public to pay down its debt and provide further growth funds. Students must assess the company's relative appeal to investors and refine a pricing recommendation for the securities underwriting syndicate.
Value of the Firm and Equity
Income Statement Data
Balance Sheet Data
FREE CASH FLOW
Intrinsic Equity Value - In Thousands
Intrinsic Debt Value
UNLEVERED FREE CASH FLOW
Value of The Firm
Firm value using Comparables
Book value Per Share
Value Of the Equity
Value Of the Debt
Value of the Firm
Average Value Of the Firm
Worth more tha uFCFF
1. What is the Intrinsic Firm Value of Tiffany? What is the Intrinsic Equity Value of Tiffany?
2. Why do customers buy from Tiffany? Is the “need or desire” different for an engagement ring from Tiffany’s in New York than for a sterling silver bookmark bought from a catalogue as a corporate “give away?” How do your answers to these questions impact the comparables you choose to estimate a PE ratio?
3. Why are the investment bankers so focused on comparable data? You are Chaney. Should this concern you?
4. What is the “Tiffany franchise” worth, over and above the uFCFF?
5. At what price per share should Tiffany take its equity public?
6. Calculate how much is Tifanny worth using the comparables? Which one would you use and why?