Blaine Kitchenware Case Solution -

The proposed solution: borrow $205 million, add to existing cash, and repurchase 14 million shares (all Class A) at $14.93, a 10% premium to the current price.

The key takeaways for any executive or student are:

Are you focusing on the ?

β_unlevered × [1 + (1 – Tax Rate)(Debt/Equity)] β_levered = 0.85 × [1 + (0.65)(0.179)] = 0.85 × (1 + 0.116) = 0.85 × 1.116 = 0.95

By issuing debt (e.g., $50 million) and using existing cash (e.g., $209 million) to buy back shares at a premium (roughly $18.50 per share), Blaine achieves two things: Blaine Kitchenware Case Solution

If Blaine maintains the status quo, they risk a hostile takeover. An activist investor could easily see the $230 million in "lazy" cash, acquire the company using its own cash reserves, and restructure it themselves—pocketing the value creation that should belong to current shareholders. Strategic Recommendations

Assuming a conservative 2.5% terminal growth rate (in line with GDP/inflation): The proposed solution: borrow $205 million, add to

The Desmond family owns a significant portion of BKI. A large-scale repurchase allows the family to consolidate control (if they don't sell) or gain liquidity (if they do), while signaled confidence to the public market. Evaluation of the "Do Nothing" Alternative