Professional

John M. Case Company

2463 Williams St.

Dover, Delaware 46975

Dear Mr. John Case,

Several weeks ago you informed the senior management that you would like to sell your company and spend more time in leisure activities. I have an offer to purchase the John Case Company. The terms that you set for the sale of the company were $20 million, with $16 million of the total in cash. I believe that the price of $20 million is a fair price.

I have secured financing for the purchase of the company as can be seen in the enclosed letters. The following is a breakdown of where the money will come from:

Equity from executives of the John Case Company $500,000

Bank Term Loan $6,000,000

Cash from the company $4,000,000

Subordinated Loan from Venture Capitalist $5,500,000

Total Cash $16,000,000

Sellers Note $6,000,000

Total $22,000,000

I hope you find the offer acceptable, as the executive board and I have great anticipation in making the John Case Company an even greater company.

Sincerely,

Anthony W. Johnson

March 19, 1985

First Bank of Delaware

1111 First Street

Dover, Delaware 46975

John M. Case Company

2463 Williams St.

Dover, Delaware 46975

Dear Mr. Johnson,

We first of all would wish to thank you for continuously turning to the First Bank of Delaware for your financial needs. We would like to inform you that we will offer you the term loan of $6,000,000 to be paid off in six years; all terms and covenants to be followed.

The financials that you sent to us secured our decision. The cash flow forecast, and debt retirement schedule that you provided show that we will be the first to be repaid, and that we will be repaid in full within four years, with all interest payments included. We believe this will be a safe and secure loan.

Sincerely,

William Burns

March 20, 1985

Mann’s Venture

2265 Mason Ave.

New York, New York 21143

John M. Case Company

2463 Williams St.

Dover, Delaware 46975

Dear Mr. Johnson,

In looking at the proposed offer you turned over to us, we believe that your buyout of the John Case Company will be profitable for every party involved. We at Mann’s Venture would like to be a part of the action. We are willing to provide you with $5,500,000.

We will require you to pay at least 9% on the principle price until it is repaid. We also would like to see returns of 20-25 percent. Based on your cash flow forecast over the next ten years we believe this is possible with the John Case Company. The forecast you provided also shows that the project will have a positive Net Present Value for Mann’s Venture at 20 percent and 25 percent.

NPV for Venture Capitalist at 20% = $1,684,840

NPV for Venture Capitalist at 25% = $13,430

Also, we like your “get rich plan” for Mann’s Venture, in which you have offered us 10 percent of the profits that the company achieves throughout its life. We are glad to be a part of the John Case Company.

Sincerely,

Milton Bradley

Background

The John Case Company is a leading producer of business calendars. The company was established in 1920, has been profitable every year since 1932, and has had sales increase every year since 1955. Sales in the company are highly seasonal, however the company operates on a level production schedule in order to minimize downtime, investment in equipment, costly setups, and to provided for economies of scale. Approximately 95 percent of sales came from existing clients through reorders, which cuts down on sales costs. Also, there are high barriers to entry into the industry. The John Case Company currently holds 60-65 percent of the market share. Further, the company is unleveraged, pays high dividends, holds two $2 million dollar lines of credit for seasonal loans, and sales are projected to grow at a rate of 5 percent per year. The statements above are all promising reasons for an investor to want to purchase the John Case Company.

There is also an unexploited opportunity for the John Case Company. The company could expand into other related product lines, for instance, appointment books, and planning books. The expansion would call for an initial expenditure of $200,000 and additional spending of $900,000 spread over the first to years of the expansion. With the expansion, sales from the new line will yield about $1 million the first year and will grow at a rate of 40 percent in years 2-4; and in all subsequent years at a rate of 13 percent. Mr. Johnson, vice president of finance and administration, believes the expansion would significantly increase the level of earnings for the company. (All financial projections throughout this case are based on the assumption that once the company is bought in 1985, the expansion opportunity will be exploited.)

Overview

Early

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