Walt Disney Bid Question - Section A Group 2

[Craig Cartier]

Hi Santiago, Teresa,

I'm writing to clarify the intent of our company valuation project.

I understand that in almost all cases of company buyouts or acquisitions, the purchase price is in excess of the market price - no stockholders would sell to an acquiring company at a price below the market value.

However, in our evaluation of Disney we calculated a figure that is significantly below the market price.  Furthermore, we did a sensitivity analysis with differing levels of WACC and g, and found that even in the most optimistic scenario, Disney is still significantly overvalued in the marketplace.

We offered the seller a price near that which we calculated, but it seems fruitless because the company would never agree to such terms.  It also seems that we would not choose to purchase Disney if this were a real-life exercise.

Are we obligated to go through the negotiation process in this case (that the fair value is less than the market price)?

Additionally, what do you suppose drives the market price in cases such as these?  We've searched online and found other valuations which also calculated Disney at significantly below its market price?

Thank you very much for your guidance.

[Craig Cartier]

---------- Forwarded message ----------
From: <teresa....@alumni.esade.edu>
Date: Fri, Mar 1, 2013 at 9:38 PM
Subject: Re: Walt Disney Bid Question - Section A Group 2
To: ccar...@gmail.com


Dear craig
In the negociation process you should try to convince the seller about the price you think is "fair" using all your analysis and assumptions.

Please let me know how it works.
Best
Teresa

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