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Mercury Athletic Footwear: Valuing the Opportunity

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West Coast Fashions, Inc (WCF) was a large business, which dealt with men’s and women’s apparel. One of their segments was Mercury Athletic Footwear. WCF wanted to dispose off this segment. They just wanted to divest because they wanted to focus more on their core business and move it up to the elite class.
John Liedtke was the Business Development Head at that time in Active Gear Inc. He had a clear idea that acquiring Mercury will shoot up AGI’s revenues for sure. It would also ensure an expansion of the key business. In order to get a clearer picture on the acquisition, he needed to compare and analyze the company’s financials well. By this he could gauge the pros and cons of this acquisition.
Are the strategic reasons behind the Merger good enough? Explain
As a team, we had different views on this question. Some reasons make us think that it may be beneficial for AGI to grab the opportunity but some make us think that it might not be as promising as it seems. Let us see why we feel it is a good idea for AGI to acquire Mercury.

Active Gear Inc. Mercury Athletic Footwear
Revenue $470,285mn $431,121mn
% Revenue Product wise 42% Athletic 58% Casual 79% Athletic 21% Casual
Operating Income $60.4mn $42,299mn
Revenue growth 2% to 6% 12.5%

Active Gear was one of the most successful firms in terms of profitability, in the footwear industry. Mercury looked like a good opportunity for an attractive investment because they almost have the same revenues, while being smaller in size, in the market. The Percent revenue in the casual footwear in AGI compensates for the gap in Mercury. It’s a perfect balance. When we looked at the industrial average of revenue growth is 10% and AGI is below the standard, however Mercury is above by 2.55%. It is a good sign to move ahead for this acquisition, as it will enable AGI to remain at the top in the market.
Both…...

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...mercury 3/26/12 10:45 PM Scribd Upload a DocumentCramer's Stock Picks See what stock Cramer is trading for his charitable trust & why. www.TheStreet.com Jim Is CBIS A Scam? Academics... Search Books, Presentations, Business,Read Now Urgent Must Read Report Never Before Seen Information www.VictoryStocks.com/CBIS Search Documents High Dividend ETFs Earn 16% On Average. Find High Dividend ETF's Online Now. FinanceCity.com Explore Buy These 12% Yields Now Forget Treasuries, buy these 12% yields instead. www.GlobalDividends.com Documents Books - Fiction Books - Non-fiction Health & Medicine Brochures/Catalogs Government Docs How-To Guides/Manuals Magazines/Newspapers Recipes/Menus School Work + all categories Featured Recent People Authors Students Researchers Publishers Government & Nonprofits Businesses Musicians Artists & Designers Teachers + all categories Most Followed Popular Sign Up | Log In Jide Wintoki From: Richard Smith, Scott Mitchell, Zack Gregory Re: Mercury Athletic Acquisition Based on our analysis of Mr. Liedtkes base case projections for a potential acquisition of Mercury Athletic, we have concluded that this is a positive net present value project, and that AGI should proceed with the acquisition. Under Mr. Liedtkes operating assumptions, we calculate the value of Mercurys discounted cash flows to be $624.446 million, and the acquisition price to be $156.643 million, yielding a net present value of $467,804 for AGI. Our calculations......

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