Scribd Logo
Upload

Welcome to Scribd!

  • 84 views

    Gillette and P&G

    Uploaded by

    Abhishek Panda
    This document contains financial information and calculations for Procter & Gamble (P&G) and Gillette, including their costs of equity and debt, returns on capital, expected growth rates, and valuations. It also shows the potential value of synergy from a merger and combined financials. A merger would create a combined firm value of $266.8 million, with $46 million in synergistic value over keeping the firms independent.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content

    You might also like

    Gillette and P&G

    Uploaded by

    Abhishek Panda
    84 views6 pages
    This document contains financial information and calculations for Procter & Gamble (P&G) and Gillette, including their costs of equity and debt, returns on capital, expected growth rates, and valuations. It also shows the potential value of synergy from a merger and combined financials. A merger would create a combined firm value of $266.8 million, with $46 million in synergistic value over keeping the firms independent.

    Original Description:

    Original Title

    Gillette and P&G(1).xlsx

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document contains financial information and calculations for Procter & Gamble (P&G) and Gillette, including their costs of equity and debt, returns on capital, expected growth rates, and valuations. It also shows the potential value of synergy from a merger and combined financials. A merger would create a combined firm value of $266.8 million, with $46 million in synergistic value over keeping the firms independent.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    84 views6 pages

    Gillette and P&G

    Uploaded by

    Abhishek Panda
    This document contains financial information and calculations for Procter & Gamble (P&G) and Gillette, including their costs of equity and debt, returns on capital, expected growth rates, and valuations. It also shows the potential value of synergy from a merger and combined financials. A merger would create a combined firm value of $266.8 million, with $46 million in synergistic value over keeping the firms independent.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 6

    Inputs

    Current riskfree rate = 3.50%


    Risk Premium = 6.13% 10.88%

    P&G Gillette
    Beta 0.56 0.45
    Pre-tax cost of debt 5.00% 5.00%
    Tax rate 30.97% 29.07%
    Debt to Capital Ratio 42.08% 54.42%

    Revenues 51407 10477


    Operating Income (EBIT) 9827 2465

    Pre-tax return on capital 28.16% 31.87%


    Reinvestment Rate = 40.00% 49.00%

    Length of growth period = 5 5

    P&G Gillette
    Cost of Equity = 6.93% 6.26%
    After-tax cost of debt = 3.45% 3.55%
    Cost of capital = 5.47% 4.78%

    After-tax return on capital = 19.44% 22.60%


    Reinvestment Rate = 40.00% 49.00%
    Expected growth rate= 7.77% 11.08%

    Value of Firm
    PV of FCFF in high growth = $ 21,724.49 $ 5,329.24
    Terminal value = $ 186,701.66 $ 63,977.77
    Value of firm today = $ 164,795.09 $ 55,979.52

    Value of Synergy
    Value of independent firms $ 220,774.62
    Value of combined firm $ 266,765.89
    Value of synergy $ 45,991.27
    26.819087361701900%

    After merger
    0.52755
    5.00%
    30.49%
    44.21%

    61884
    12292

    29.10%
    70.00%

    Value of firm with synergy


    6.73%
    3.48%
    5.29%

    20.23%
    70.00%
    14.16%

    $ 16,440.32
    $ 323,972.86
    $ 266,765.89

    Outstanding Shares (Gillette)


    Share price (Without Synergy Gains)
    Outstanding Shares (P&G)
    Swap Ratio
    Share price (Synergy Gains)
    All Values in $ Mn

    In terminal year
    0.53

    In terminal year (Weights based on terminal value)


    6.73%
    3.48%
    5.29%

    999,000,000
    56.04
    2,543,838,000
    0.975
    69.11
    The capital invested at Gillette has been volatile, but we will assume that Gillette can earn a pre-ta
    All Values in $ Mn P&G
    EBIT 9827
    EBT 9350
    Capital Employed 34901
    ROCE 28%
    Long Term Debt 12554
    Interest expenses 629
    Pre tax debt rate 5%
    Total capital 29832
    D/(D+E) Ratio 42%
    Tax Expenses 2896
    Tax Rate 30.97%
    Market rate 11%
    Risk free rate 5%
    Risk premium 6%
    Gillette
    2465
    2384
    7735
    32%
    3386
    81
    2%
    6222
    54%
    693
    29.07%
    11%
    5%
    6%

    You might also like