HBS Finance Case #218-058
Posted: 18 Jan 2018
Date Written: January 10, 2018
In December 2017, Jacobs Douwe Egberts (JDE, a Dutch coffee company) made an offer to acquire OldTown Berhad (OTB, a Malaysian coffee company and operators of the OldTown White Coffee chain). Three large shareholders, representing more than half of the outstanding shares, have agreed to tender their shares and analysts who followed OTB were recommending all other investors accept the offer. The remaining shareholders must decide if the acquisition offer is reasonable and whether to tender their shares.
The short (3 pages of text) case provides a simple introduction to DCF valuation. It also provides data to use two other valuation methods (multiples and acquisition premia) to benchmark the DCF-determined equity value. Finally, it highlights the growth potential (and risk) of demand for consumer goods in Asia generally and China specifically. The key question is whether the projected cash flows are expected cash flows in a statistical sense or whether they are optimistic cash flows.
Keywords: Mergers & acquisitions, valuation, discounted cash flow (DCF), Malaysia, coffee, consumer packaged goods (CPG), free cash flow (FCF), multiples, bidding premia, Netherlands, tender offer
JEL Classification: G34, G32, L25
Suggested Citation: Suggested Citation