QUESTIONS- FSN, Troax and the Satech acquisition opportunity
1.  Quantitively, did Troax look like an attractive investment for FSN in 2012? Use the base-case scenario in Exhibit 8 to do an APV valuation, and an LBO model to calculate the IRR and MOIC that FSN could expect in 2012. You can assume that: • The corporate tax rate is 20%. • The Pay-In-Kind interest on the vendor loan is tax deductible. • For an APV analysis, you can assume that the discount rate (rA) is 8% (not including compensation for fees, carry, or illiquidity).
2.  What benefits / value might Troax get from acquiring additional companies in their industry? Which of the companies in exhibit 6 do you think would be the most interesting acquisition opportunities for Troax and why?
3.  What are the pros and cons of Troax acquiring Satech? How would an acquisition of Satech affect the enterprise value of Troax? To answer this, you need to calculate Troax’s stand-alone enterprise value, the enterprise value of Satech under Troax management, and relate to what Troax is paying for Satech. To make things easier, assume the deal closes at the beginning of 2014 so you can use all of 2014 in your analysis.
4. Consider the financing alternatives in Exhibit 10 of the case. What is the effect on FSN’s investment return on these alternatives? What are the pros and cons of offering Satech shareholders a stake in the combined company as part of the consideration? What are the pros and cons of issuing a high-yield bond and refinancing the bank loan? Which alternative would you recommend if you are working for FSN?
• Do not use outside historical or industry information.
• Answers should be typed, double-spaced, 11p or 12 p fonts, and at most 6 pages of text.
• Numerical calculations, spreadsheets, and tables can be put in an appendix, which does not count towards the 6-page limit. Your appendix should be 7 pages or less.
• Failure to adhere to the page limits and format guidelines will result in point deductions.
• Be sure to clearly state and motivate any assumptions and calculations you make.
• Try to be succinct and to the point in your arguments. To obtain a high score, your report should also be well-structured, well formulated, and address all the relevant issues.