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Business Finance and Quantitative Methods Assignment

   

Added on  2020-03-23

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Business finance and quantitative methods 1BUSINESS FINANCE AND QUANTITATIVE METHODSBy NameCourse TitleInstructor’s nameName of InstitutionName of Department

Business finance and quantitative methods 2IntroductionDick Smith Holdings LimitedThis particular essay attempts to heighten a brief summary of the ownership history of Dick Smith Holdings Limited. It also incorporates the critical evaluation of the valuation of the company when it was acquired by Anchorage Capital Partners and its Initial Public Offer (IPO) amount. The essay also attempts to assess the ethical dilemmas that face Anchorage Capital Partners regarding the floating of the company and the senior executives and directorsof Dick Smith Holdings Limited in respect to its financial reports made in the 2014/2015 accounts and reports. Dick Smith Holdings Limited was an Australian wide-chain of retail stores domiciled in Sydney, Australia and was founded by Dick Smith in 1968 (Dick Smith Holdings Limited annual reports, 2015). The company basically sold consumer electronics goods, electronic project kits and hobbyist electronic components for its customers in Australia, New Zealand and other parts of the world. The company expanded effectively into New Zealand and unsuccessful in some other nations globally (Anderson, Sweeney, Williams, Camm, and Cochran, 2012). Dick Smith Holdings Limited expanded to be a leading business in Australia that ensured that almost every electronic enthusiastic in the country has one of its catalogs and thus enhanced profits. In the FY2012, Dick Smith Holdings Limited was formerly acquired by Anchorage Capital Partners at an opening cash payment of AU$20 Million and the total ultimate cost of some AU$115 Million. Brief summary of the ownership history of the Dick Smith Holdings LimitedDick Smith Holdings Limited was initiated in 1968 by Dick Smith. The company started as small rented buildings in a car park in the Sydney area of Neutral Bay with the total capital ofjust AU$610 and focused mostly on servicing and installing car radios (Puncheva, and Michelotti, 2014). Due to the company rapid increase and success in the business sector, the company moved to a bigger premises so as to enhance its business operations in the country. The company profited mostly from CB Radio business, and by the end of ten years, it had branches in all the mainland regions in the country. Dick Smith Holdings Limited was ownedby Dick Smith and his wife until they basically sold the majority of shares to Woolworth Limited in 1982 (Clements, 2015). The company expanded its diverse range of products especially in between 1970 and 1980 and basically stocked products such as TV receiving stations and Heathkit electronic kits because of the waning interest rates. The business had expanded to about 20 stores and the initiator together with his wife sold 60% of the business shares to Woolworth Limited and the remaining 40% ownership was completed in 1982. Dick Smith Holdings Limited continued to increase to its setup of small main street stores in

Business finance and quantitative methods 3the regional and suburbs towns across Australia. The company later established Dick Smith Electronic Powerhouse which was a superstore across the east coast of Australia that carried an extensive range of products in the audiovisual, computing and armature radio areas to enhance its productions. In the FY2008, following Woolworth Limited review of its consumer electronics division, Dick Smith Electronic Powerhouse revamped its flagship storeas a notion to Dick Smith Technology branding (Lau, 2016). In 2009, Woolworth Company Limited confirmed the end of the Dick Smith Electronic Powerhouse as progressively phased out over the subsequent three years as part of its division. Dick Smith Electronic Powerhouse ended its operations in 2016 with several years of Anchorage Capital Partners acquisition. Critical evaluation of the valuation of the company when it was acquired by AnchorageCapital Partners and its Initial Public Offer (IPO)Dick Smith Holdings Limited had been owned by Woolworth Limited since the early 1980’s,until early in 2012 when Woolworth Limited announced that the business was underperforming and non-core and instigated a sale process (Schauten, Dijk, and Waal, 2016). After a period of distinctiveness, in November 2012 Anchorage Capital Partner acquired the company for AU$20 Million. Anchorage Capital Partners announced in FY2012that it had entered into an agreement with Woolworth Company Limited to acquire 100% of Dick Smith Electronics with the entire transaction anticipated to be completed in November 2012. Dick Smith Electronics was an iconic Australian consumer electronics company that became part of Woolworth Company Limited in 1980 (Essayyad, 2012). The deal had been conventionally structured so that Dick Smith Holdings Limited will emerge from the sale supported by a strong statement of financial position with considerable asset backing and no core liabilities. As part of the acquisition, Anchorage Capital Partners would also support the operations by offering additional guarantees and cash investment. As at FY2012, Dick Smith Holdings Limited reported sales worth AU$1.6 Billion. Anchorage Capital Partners paid as much as AU$115 Million for Dick Smith Holdings Limited because it was agreed that an approximately AU$20 Million would be paid up front. As at FY2012, Dick Smith Holdings Limited was basically valued at AU$420 Million (Dias, and Saizarbitoria, 2016). The company was heavily criticized because it was cheaply sold because the company could not make sufficient profits needed by the company. Woolworth Company Limited having struggled to find a fit for the electronics retailer from its acquisition in 1980, the company was keen to offloading the non-core business division for approximately AU$115 Million. Since Anchorage Capital Partners is a privately owned institution, the price details of the newly acquired asset, the company shares are not routinely made public. When Dick Smith

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