Blaine's Kitchenware

Blaines Kitchenware

Blaine kitchenware has occupied the industry for a over 80 years and continues to gain control in the market it occupies. As the CEO of the company, Mr. Dubinski is faced with the difficult decision of determining what is the best for the family company. The following questions will address what decision is the optimal and why it is beneficial for BKI.

* Do you believe Blaine’s current capital structure and payout policies are appropriate? Why or why not?

The main dilemma in the case is whether Blaine Kitchenware’s should choose to repurchase its own shares or not. If Blaine’s Kitchenware does repurchase its shares, they must consider whether to partially repurchase the market float or go for a complete buyback where Blaine’s family would become the owner of all the remaining shares. They also have to consider of the effect of the repurchase on various factors like the risks involved in raising a debt especially when they are large, very conservative and debt free. They should also consider things such their acquisition plans, their earnings per share and their dividend per share, ownership structure, capital structure and of course the reputation of the company in the market after the buyback. With this in mind we can consider a few situations and then decide what Blaine should do, keeping in mind the perspective of both the existing shareholders' as well as Blaine's c family’s.

Since no debt is being raised, if all the cash & cash securities plus the market securities are used for the buy-back, his family may like this option. Their management will have increased stakes, this will reduce their chance of being acquired and this will provide more dividends to their remaining shareholders.

There is a big question facing Blaine and that is why would their existing shareholders want to sell their equity back to the company? Another scenario is to completely buy-back the market float. Although this will involve the company raising a...