公司财务精品教学（徐江旻）Session7 SealedAir casestudy.pdfVIP

Sealed Air Case Study Jiangmin Xu The description of the case itself can be purchased from Harvard Business School at /cb/product/294122-PDF- ENG Sealed Air • Sealed Air Corporation, April 1989 – Founded in 1960; Headquartered in Saddlebrook, NJ – President CEO: Dermot Dunphy – Makers of protective packaging material and systems e.g. the famous packing bubbles everyone loves to pop © Jiangmin Xu Sealed Air • Balance sheet data (year end, 1988) – Book value (accounting net worth) = $162.3 million – Debt = $33.5 million – Cash short term Investments = $55.1 million • Share information – Recent share price: $44 -- $46/share – 8.245 million shares outstanding – Market Cap = $375 million – Dividend per share ≈ $0.16/quarter (never larger than $0.18 in the company’s history as a public firm) © Jiangmin Xu A Leveraged Recapitalization • May 1989 – Borrow over $300 million – Pay $40 special dividend on May 11, 1989 – Total payout of $330 million • Exceeds accounting net worth • Almost 90% of the prior market value of equity • Questions: – Why did Sealed Air undertake a leveraged recap? Was it a good idea? For whom? – How much value was created? Where did it come from? – Why pay a special dividend? What was the impact of the transaction on investors? – Was the transaction successful? © Jiangmin Xu Some Background • Things used to be easy… – The company was growing rapidly during its first 25 years – Most of its products were patented products – Focus was on the development of a strong sales force • Sealed Air’s Changing Competitive Environment – What were Sealed Air’s margins? How efficient were its operations? – Why did Sealed Air’s managers ha