Kohler Case Essay

729 Words Sep 28th, 2011 3 Pages
Kohler (A) case questions
(each question carries up to 20 points) 1) Who are the winners and losers from Kohler’s 1978 stock split?

Kohler Co. has always been a private company. CEO and Chairman Herbert Kohler stated that this private status contributed greatly to the success of Kohler Co. He mentioned several arguments to back up this statement. First of all, a privately owned company is not required to publish financial and non-financial information about its operations to the public. Herbert Kohler believed these financial statements would give away to much information to competitors. Secondly, some long term investment decisions would be hard to explain to outside shareholders. Herbert Kohler pointed to the decision of Kohler
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Thirdly, there was a Milwaukee brokerage firm that had made a market in buying and selling non-family Kohler shares.
Herbert Kohler initiated the stock split to assure that Kohler Co. remained a privately owned company for reasons mentioned above. Because of the success of this stock split, it can be stated that Herbert Kohler was one of the winners of this stock split. Also Kohler Co. was a winner since the stock split made sure the company remained privately owned, and thus would not be required to publish detailed financial information. This also meant that Kohler Co. didn’t have to justify its strategic decisions to outside shareholders, and thus enabled Kohler Co. to stay focused on the long term, rather than focus on short term decisions.
The minority shareholders of Kohler Co. who sold their shares back to the company can be regarded to as losers of this stock split. Because the share price of Kohler Co. continued to increase in the following years, the minority shareholders would’ve benefit more by hanging on to their shares, as opposed to selling these shares back to the company. Perhaps the biggest loser in this deal is the Milwaukee brokerage company, who focused on buying and selling of Kohler Co. shares. Due to the stock split, the trade in these shares significantly reduced, which in turn reduced the business for this brokerage company.

2) Why does Herbert Kohler want to do the recap? Why does he want to buy the minority shareholders when he

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