SMM225 Corporate Restructuring

Part A – Unilever (seen case)

Question 1

Describe the range of restructuring initiatives announced by Unilever in the wake of Kraft-Heinz’s offer, explaining briefly the purpose of each initiative. (200 words maximum) 16 marks

Question 2

Explain whether Unilever’s restructuring initiatives were successful, in your view. (150 words maximum) 12 marks

(Part A total marks = 28)

Part B – Thomas Cook (seen case)

Question 3

Describe the context surrounding Thomas Cook’s bankruptcy, explaining the key issues and the remedial actions taken by the company to avoid bankruptcy. (150 words maximum) 12 marks

Question 4

Explain the key differences between administration (UK procedure) and liquidation, then discuss which procedure was used in Thomas Cook’s case, explaining the likely reasons for that choice of procedure. (150 words maximum) 12 marks

(Part B total marks = 24)

Part C – Exco (unseen case)

Exco plc is planning to separate one of its subsidiaries (‘SplitCo’), through a split-off of the entire share capital of SplitCo, amounting to 1 million shares outstanding. The estimated value of SplitCo’s shares (before the split-off) is £3 per share. Exco plc’s shares are currently trading at a market price of £6 per share. Exco’s directors need to set the value of the share exchange ratio and are considering two alternative ratios:

a) 3:1 ratio (i.e. exchanging 3 SplitCo shares for 1 Exco share)

b) 2:1 ratio (i.e. exchanging 2 SplitCo shares for 1 Exco share)

Question 5

Compute the total value of the Exco shares to be exchanged in the split-off under each of the two alternative exchange ratios shown in a) and b) above, assuming that the offer is fully subscribed. 8 marks

Question 6

What advice would you give to Exco’s directors about choosing the exchange ratio? Set your suggested exchange ratio, explaining the reasons for your choice. Your answer should include an explanation of the pros and cons of using the two alternative exchange ratios shown in a) and b) above. (250 words maximum) 20 marks

(Part C total marks = 28)

Part D – Siemens Energy (unseen case)

The question below is based on the Financial Times article included with the exam materials.

Question 7

Explain the possible reasons that led Siemens to choose a spin-off as a form of separation (as opposed to using other separation alternatives) for its energy business and speculate on the possible reasons for Siemens’s decision to spin off only 64.9% (as opposed to 100%) of Siemens Energy shares. (250 words maximum) 20 marks

(Part D total marks = 20)