Deluxe Corporation Case Study

ECOLE HASSANIA DES TRAVAUX PUBLIC

&

ECOLE NATIONALE DES PONTS ET CHAUSSEES

Deluxe Corporation Case Study

Corporate Finance Professor K. Matthew Wong, Ph.D., CFA, J.D. June 2010

El Habib BIDAH June 2010

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Executive Summary

Deluxe Corporation is an American Check printer company experiencing a mature growth of the business which leaves its managers with a few investment opportunities. However, the problems the company face and the competitive nature of the industry make the survival on its own difficult. To steer a path to survivability, we should adopt financial policies that afford the company the necessary funding and the flexibility needed. In order to achieve positive results, several analysis have been presented, financial statement analysis, and different scenarios regarding the given levels of bonds rating, that we should respect, to define the maximum level of debt for each rating and the cost of capital corresponding. The next step was to repeat this calculations regarding to each ratio criteria and to take a worst case scenario for the EBIT interest coverage ratio. The final objective was to find a balance between three major objectives, position the company in an investment level of rating, keeping the financial flexibility, and the optimal cost of capital. As one of the possibilities we have recommended then, an A level of rating we thought can balance between the three objectives. The proposed changes should bring the positive results and creating the value for the shareholders.

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Introduction

Industry: Deluxe Corporation’s main business is printing and selling checks, In a growing maturity of the market for paper checks in the US., a look at the financial statements confirm this: Declining sales, however, checks as payment method are also declining as online bill pay and credit cards become more popular, so while Deluxe is fairly stable business, it’s also a declining one and will continue to be.

Deluxe faces...