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Enron Mail |
OK Gang:
Well, I=01,ve been crunching numbers all day, and haven=01,t yet gotten to = the=20 writing. I've attached Dylan's original responses for reference. Figure= =20 it'll be a memo from Time's CEO to the Time Board. I=01,ve leaving now for Mendocino, but will be back early tomorrow to finis= h=20 this up. Please check out the spreadsheet. The case is sort of confusing=01*how do Time=01,s analysts value Time at $1= 89-212,=20 when they=01,re trading at 109 the day before the announcement of the deal = with=20 Warner. That doesn=01,t jive. Are they saying that, absent synergies, the= =20 combined Time/Warner is worth the enterprise value of Time at 189-212 plus= =20 the enterprise value of Warner at $63-71 (again, the analysts valuation)? = =20 That just seems ridiculous, give where they=01,re trading. Anyway, here=01,s where my analysis is heading----tell me if I=01,m smoking= crack. The deal isn=01,t really $175 per share. It=01,s $175 LESS the taxes that = will=20 have to paid (since it=01,s a purchase deal) PLUS the value of the tax shie= ld=20 created by the net increase of $8.9B in new debt that Paramount will take= =20 on. Does this seem right? Could folks look at my spreadsheet? I=01,ve go= t it=20 conceptually set up, but I=01,m not quite sure how to calculate the taxes p= aid=20 under the purchase method or the value of the tax shield (assuming that thi= s=20 is correct. If I=01,m just completely out of it with this angle, just let = me=20 know. In any case, seems that there=01,s some value in the tax-free=20 (Time-Warner) versus the taxable (Time-Paramount) deals. Presumably, we=20 could take the total enterprise value of Time-Warner (nontaxed) and compare= d=20 it to the total enterprise of Paramount-Time (taxed) and compare the two. = I=01, ve got a hunch that the Time-Warner number may win the day, but I haven=01,= t=20 gotten that far in the crunching yet. In any case, I=01,ll be back around Noon tomorrow and will crank the puppy = out. Best, Jeff
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