AGI possesses and operates ICS Courier, a national fixed- Amtelecom Communications and route courier business, a regional telecommunications, cable television and Internet business. Cash is thus diverted to ICS Courier in order for it to cover its losses, therefore Amtelecom Communication's capital requirements are not being met. However, AGI's stock has been performing badly.
In order to ease these issues, the board has determined to sell off Amtelecom Communications. The three sales choices are: selling to a strategic buyer, IPO via a common share offering and IPO via an income trust offering. Students can learn about valuation in a strategic setting from this case. Furthermore, it provides the opportunity to apply sum of parts valuation to value a diversified firm, apply discounted cash flow, run a trades investigation to determine the standalone value of a companies, and obtain a basic understanding of income trusts.
Learning Objective: This case can be used in introductory and intermediate finance lessons to teach pupils about valuation in a strategic setting. Before analyzing the case pupils should know about the cost of time and capital value of money. Especially, this case provides a chance to students to:
Apply amount of parts valuation to value a business that is diversified
Use discounted cash flow, comparable and preceding trades evaluation to ascertain the standalone value of a firm
Gain a basic understanding of income trusts and the best way to value a business based on anticipated returns
When selling a business consider the effects of capital market trends and various alternatives
Learn about the Canadian telecommunications business
Publication Date: 12/20/2004
This is just an excerpt. This case is about Finance
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