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The Khemka family of India--founders, managers, and majority owners of Russia-based SUN Brewing--faces a difficult decision in 1998. Following the ruble's massive devaluation in August 1998, the stock price of SUN brewing, which is publicly listed on the Luxemburg exchange, has declined by over 90%. Only two months earlier they had planned a $200 million to $400 million equity and debt offering on the New York Stock Exchange to finance major investments in the face of increased competition from international beer companies in the Russian market. However, the ruble devaluation and the deep financial crisis that has ensued has led to the cancellation of the proposed CYSE listings--and to a $40 million bridge loan that now needs to be repaid. The family is debating the merits of two main alternatives: To bring in a major global beer company as a strategic partner at this difficult time or to stay on as controlling owners, inject millions of dollars into the company from other parts of the family business group, and weather the storm until better terms can be expected from any outside provider.

In late 2004, Hilmi Panigoro, CEO of the publicly traded Indonesian oil company Medco Energi Internasional, is striving to regain majority control of the company his brother Arifin founded in 1980. The Asian financial crisis of 1999 led to a major restructuring that left the Panigoros with a 34.1% equity stake in Medco. Two other large shareholders are now looking to sell their combined stake of 50.9% and have selected Temasek, the Singapore government's investment arm, as their preferred bidder. The Panigoros have a right of first refusal, but only a four-month window to raise the capital needed to head off Temasek's bid. The Panigoro brothers are considering a two-stage plan: a leveraged buyout (LBO) to be followed by a secondary equity offering at a share price high enough to enable them to repay the loan and maintain majority control of their company. As attractive as the plan seems, they worry about the high cost of the loan and the risk of the offering failing. In January 2005, with no time left to consider alternative financing plans, the Panigoro brothers have to decide whether to go ahead with the plan or lose control of Medco to Temasek.

The Khemka family of India--founders, managers, and majority owners of Russia-based SUN Brewing--faces a difficult decision in 1998. Following the ruble's massive devaluation in August 1998, the stock price of SUN Brewing, which is publicly listed on the Luxemburg exchange, has declined by over 90%. Only two months earlier they had planned a $200 million to $400 million equity and debt offering on the New York Stock Exchange to finance major investments in the face of increased competition from international beer companies in the Russian market. However, the rouble devaluation and the deep financial crisis that has ensued has led to the cancellation of the proposed NYSE listings--and to a $40 million bridge loan that now needs to be repaid. The family is debating the merits of two main alternatives: To bring in a major global beer company as a strategic partner at this difficult time or to stay on as controlling owners, inject millions of dollars into the company from other parts of the family business group, and weather the storm until better terms can be expected from any outside capital provider.

In late 2004, Hilmi Panigoro, CEO of the publicly traded Indonesian oil company Medco Energi Internasional, is striving to regain majority control of the company his brother Arifin founded in 1980. The Asian financial crisis of 1999 led to a major restructuring that left the Panigoros with a 34.1% equity stake in Medco. Two other large shareholders are now looking to sell their combined stake of the 50.9% and have selected Temasek, the Singapore government's investment arm, as their preferred bidder. The Panigoros have a right of first refusal, but only a four-month window to raise the capital needed to head off Temasek's bid. The Panigoro brothers are considering a two-stage plan: a leveraged buyout to be followed by a secondary equity offering at a share price high enough to enable them to repay the loan and maintain majority control of their company. As attractive as the plan seems, they worry about the high cost of the loan and the risk that the offering might fail. In January 2005, with no time left to consider alternative financing plans, the Panigoro brothers have to decide whether to go ahead with the plan or lose control of Medco to Temasek.

David Jacobs founded a high-end ski apparel company in 1978. He successfully built and grew the company, establishing a major international brand that appealed to ski racers and other active skiers. In 1995, he sought external financing to support further growth of the company and structured a financial deal with CHB Capital Partners, a private equity firm in Denver. By 2004, Jacobs was ready to consider alternative types of equity transactions that would provide a source of liquidity to him and his family, including sale of Spyder to another apparel company and sale of a large block of stock to a private equity firm. Poses issues of valuation of a privately owned company and presents alternative ways to harvest wealth from a private company. Also brings up family business issues because the transaction would have a significant effect on two of his children who are involved in the business.

Kohler Co., best known for its plumbing fixtures, is a large, private family firm. As part of a recapitalization aimed at preserving family ownership of Kohler Co., nonfamily shareholders, who held 4% of common stock, were required to sell their shares to the company. A group of dissenting shareholders filed a lawsuit claiming that the buyout price undervalued their shares by a factor of five. In April 2000, Herbert V. Kohler, Jr., chairman and CEO, has to decide whether to settle with the dissenters and, if so, at what share price. The decision calls for a detailed valuation of the company at the time of the recapitalization. Provides the necessary data for students to value the company using both a discounted cash flow approach and a multiples (comparable companies) approach. Students must identify and understand the different valuation assumptions that can lead to a wide range in price, including the applicability of discounts for lack of marketability and lack of control. Exhibits are available in electronic form to facilitate analysis of the data (HBS courseware 9-205-707).

Spreadsheet Supplement for case 204081

Helps students understand the principles underlying competition and antitrust policy in the context of the proposed GE-Honeywell merger. The U.S. Department of Justice has already approved the transaction and it is being considered by the European Commission. The Competition Commissioner, Mario Monti, must analyze the economic consequences of the proposed merger and evaluate how it will affect competitors, customers, and product markets. He must also address key policy choices. In understanding the nuances of the transaction, students identify different sources of value and must confront the question of whether the efficiencies generated enhance social welfare in the long run. The decision of whether to approve the merger, and on what terms, provides students with insights into the complexities of operating under multiple regulatory regimes.