Case Study on Mrc (B)

Table of Contents

1. Company Overview……………………………………………………………………… 2

2. Fiber Market & Product Overview………………………………………………… 2

3. Factors influencing Investment to Polyester…………………………………. 3

4. Alternative options ……………………………………………………………………… 4

5. DCF Valuation Framework…………………………………………………………….. 6

5. Sensitivity Analysis 11

6. Recommendations 13

7. Consideration for Proposed Recommendations 14

8. Appendix 15

1. COMPANY OVERVIEW

MRC Inc is a manufacturing concern operating in the product of power break system and frames for trucks, bused & automobiles and industrial furnaces & heating equipment and for automobile. Archibald Brinton, President of MRC, Inc a Cleveland-based manufacturing concern, had begun an active program of diversification by acquisition. The need for rapid diversification seemed compelling. Previous attempts at internal diversification had foundered on management’s lack of expertise in markets and technologies outside automotive area. He turned to acquisition as a means of buying up established Sales & earnings as well as managerial and technical knowhow.

In 1966 sales of the 13 divisions of MRC were running at an annual rate, in excess of $340 million. No single division accounted for as much as 20% of total sales, but largest five divisions contributed 70% of the total. The most important product lines in terms of sales were: (1) Industrial furnaces and heat treating equipment, (2) Parts used in the manufacture of railroad rolling stock and other foundry products, (3) Rayon fiber for automobile tire cord and apparel fabrics, (4) auto, truck and bus frames, and (5) power brake systems for autos, trucks and buses.

Between 1961 and 1965 MRC had nearly tripled sales and earnings. During this period the company had an active program of diversification by acquisition and concluded acquisitions at an average rate of one new company per year. The reasons for MRC’s diversifications includes stabilization of the...