OTHER PEOPLE'S MONEY TEACHER NOTES

NOTES:

A.    GARFIELD AND CARMEN

Garfield discovers that New England Wire and Cable (NEWC) is UNDERVALUED.

   $30 million in real capital
+$10 million in real estate
   $40 million in physical assets
+$60 million in subsidiaries (plumbing, adhesive)--this means NEWC is a CONGLOMERATE
+$25 million in financial capital (pension fund and $10 million cash!)
   $125 million value--  no outstanding liabilities:  no debt, no fines, no lawsuits

assume $100 million worst case/ 4 million outstanding shares = $25 of REAL VALUE per share

shares were trading at $10

and are currently trading at $14 because Garfield is buying

Garfield tells Jorgy to liquidate the Wire and Cable Division

Jorgy refuses,
    He is NOT being a sentimentalist
    he is a BUSINESSMAN, and is using economic arguments
    NEWC is not lOSING money, it has an economic profit of 0!

Garfield is "NOT a long-term player", he files a 13d and puts the company 'IN PLAY'

B.      KATE'S DEFENSE

Jorgy says Garfield only owns 12%
    He owns 20%, the board 5%, the union 5%

C.      STANDSTILL AGREEMENT

Kate negotiates a "standstill agreement"--both sides agree to stop buying

Garfield sets up buying through OPM ( a SHELL or HOLDING company), offers buyout at 20

Kate tells Jorgy to initiate

D.      TRO

Kate gets a TEMPORARY RESTRAINING ORDER against Garfield based on previous failure to file a 13d

She approaches Garfield about GREENMAIL--NEWC will pay $18
        he owns 12%, if he paid an average of $14 a share he paid $6.72 million
        she is offering $8.64 million, a profit of almost $2 million

He demands $25, says historical high was $60
        she offers $20

he makes a "unique" proposal--"easy come, easy go"

E.    SWAP PROPOSAL

Garfield proposes NEWC give him the W&C division in exchange for his stock

IS THIS A GOOD DEAL?

Company is worth $125 million
        W&C division worth $40 million--other divisions ($40 million) and cash ($25 million)
        Garfield owns 15% of stock (600K shares) @ $15 so paid $9 million
        Current value of holdings is about $11 million

Jorgy refuses, says Garfield paid $13 million and will break up the factory for $40 million, and make $25 million for shutting down the factory and firing workers
            Jorgy is underestimating

Garfield PAID $9 million for something he will be able to break up and sell for $40 million!

CEO Coles supports this deal:
        eliminate the losing division and allow him to run the more profitable divisions
        have more control by controlling more stock--Jorgy owns 20% (800K)
        if 600K shares are 'retired', his shares are now worth 24%

Jorgy demands

F.      PROXY FIGHT

Kate convinces Garfield to accept a proxy fight at the next shareholders' meeting

Why?  Garfield is 'OVERLEVERAGED'--
        LIQUIDITY is POWER

G.     GOLDEN PARACHUTE

Coles demands a GOLDEN PARACHUTE from Jorgy

Jorgy refuses

Coles sells the right to vote his shares--his proxy--to Garfield
        100, 000 shares, 2.5% of the total
        wants $1 million

Garfield buys and 'option'
        $1 million if he needs them, $500k if he doesn't

Bea goes to see Garfield and offers $1 million Greenmail
        Garfield proposes marriage to Kate

H. SHAREHOLDERS' MEETING

JORGENSON'S SLATE
INVESTOR - DIVIDENDS		 GARFIELD'S SLATE
SPECULATOR - CAPITAL GAINS
KEEP SELL
REINVEST CASH
LONG RUN -FUTURE
infrastructure		 SHORT RUN - NOW
obsolete
ETHICS
external costs		 EFFICIENCY
other profit opportunities

I. VOTE

4 million outstanding shares:

2.2 million for Garfield = 55%

1.7 million for Jorgenson = 42%

100,000 not voting = Coles 2.5%

J. WHITE KNIGHT

AIRBAGS

Kate finds a

the Mitsushimi corporation, as airbags are made out of wire cloth

She offers a union buyback of his shares at $28, he says they will go to $30

Why? What are advantages of Deming Management Method--workers are owners = MARXISM?