Torstar Case Report Essay

1592 Words Jan 16th, 2012 7 Pages
Group-based case report
Torstar Corporation
BUSN81 Theory of Corporate Finance

2011 Autumn

1. Introduction
The case of Torstar Corporation suggests the plan and result of repurchasing its Class B shares in December of 1997. Besides this, the situation of its business structure, capital structure and expenditures, future plan are also described in the case. Therefore, the purpose of our case study is to state, analyze and drew to some important conclusions about Torstar Corporation, and try to estimate its power to compete with a new national newspaper. 2. Background
Torstar Corporation was incorporated on February 6, 1958 and published Canada’s largest newspaper Toronto Star. It had two main rivals which are Sun Media
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They hope Torstar Corporation can continue the historical expansion of the newspaper and book division.
In order to mitigate the side-effect caused by recent investment. Repurchase would result in fewer shares outstanding and thus higher equity value per share which leads to a better performance of the stock. It also sends a signal to the market that the management believes the stock is undervalued. The price of the stock would go up.
As a result of the repurchase sends a strong signal to the investors. The signal is costly as a repurchase would use up corporate cash and hard to mimic. * Increase the EPS which shows great confidence of future performance
Repurchase would decrease the number of shares outstanding which leads to directly change of EPS of the Torstar Corporation. In the interim financial statements, the EPS shows great improvements after the repurchase. (Show in Figure 1)

Figure 1 EPS change in 1997 * Availability of excess cash from operations
By checking the interim financial statements, cash provided by operating activities of Torstar Corporation face an increase in the year 1997, from 25.6 million to 130 million dollars. The retained cash from operation activities is too much as the normal on-going capital expenditures was expected to be 25 million to 30 million dollars. Additionally, Capital cycle in the publishing industry is approximately six years and Torstar

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