Case #2 - FMC's Recapitalization: Due May 28, 1997

You work for Goldman Sachs, the investment banker advising FMC. Today is April 22, 1986, and you are scheduled to meet with management representatives from FMC within the next week to discuss their proposed recapitalization plan. The plan was first announced on February 21 (1986) and it has been met with some opposition from shareholders, including proposed class action shareholders' litigation in Delaware court, a 13D filing by Ivan Boesky, and rumors of potential hostile activity by Drexel Burnham Lambert.

Your assignment is to prepare a written report for management recommending a strategy for FMC. In particular, consider the following alternatives and make a recommendation:

1. Should FMC proceed with the proposed offer under the currently proposed terms?

2. Should FMC amend the terms of the recapitalization plan to make it more attractive to its shareholders?

3. Should FMC abandon its plan completely?

4. Should FMC consider a full blown LBO (i.e., offer to buy all of the shares of the outside equity holders)?

You should support your analysis taking into account the information on accounting performance, stock price performance, and the information that is publicly available as of April 22, 1986, (e.g., information from Dow Jones News Retrieval). Finally, you should be prepared to defend your position in class on May 28 (when your report is due).

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Information on daily trading of FMC stock from January 1, 1985 through April 22, 1986 is contained in the spreadsheet F423C2.XLS (a self-extracting ZIP file containing a spreadsheet; it is also available on the Simon School fileserver).

Information from Dow Jones News Retrieval in the Appendix, describes the public information about FMC as of April 22, 1986.

The spreadsheet F423C2AC.XLS (a self-extracting ZIP file containing a spreadsheet; it is also available on the Simon School fileserver) contains historical financial information on FMC from CompuStat.

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