Professional Documents
Culture Documents
Company
Ericka Lopez
David Bruner
Curtis Chan
Matthew Vu
FRL 440
In 2002, Blanka Dobrynin from Aurora Borealis LLC took notice of Wm. Wrigley Jr.
Company’s performance above the market indexes without the use of any debt. She used an
“active-investor” strategy to capitalize on companies that she felt could improve their returns if
they restructured their capital structure. Her researchers had to analyze the effects of Wrigley
assuming $3 billion in debt to either buy back outstanding shares or use the money for a dividend
payout. They also needed to analyze the cost of debt factored into the cost of capital calculation
to see if the debt could maximize the value of the firm. If the analysis does conclude that buying
back shares is the best use of the debt, then the Wrigley family would have even more control of
the company through its voting power. Another important issue to address is the final credit
rating that Wrigley would be assigned after incorporating debt into their capital structure.
Dobrynin would have to successfully persuade the Wrigley Company that the capital restructure
would be beneficial if she wants to implement her strategy.
1. In the abstract, what is Blanka Dobrynin hoping to accomplish through her active-
investor strategy?
Blanka Dobrynin is a financial entrepreneur who plans to use her active-investor strategy
to help increase revenue for firms. By using her strategy, Dobrynin can identify opportunities for
corporations to restructure and invest significantly in shares of the target firm. In addition,
Dobrynin can engage in the process of persuading management and directors to adopt more
efficient policies to earn an investment gain.
2. What will be the effects of issuing $3 billion of new debt and using the proceeds either
to pay a dividend or to repurchase shares on:
If Wrigley’s decides to repurchase its shares, the earnings per share will decrease as seen below:
Repurchase Worst Case Most Likely Best Case
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