Blaine Kitchenware Case Solution |link|

By borrowing $100 million (not $50 million) and returning capital to shareholders via both buybacks and dividends, Blaine Kitchenware would unlock approximately $30-40 million in shareholder value, lower its cost of capital, and secure the Blaine family’s control for another generation. This is the complete, actionable solution to the Blaine Kitchenware case.

To implement the strategic recommendations proposed, the following implementation plan is suggested:

A bloated equity base dilutes the Return on Equity. Blaine Kitchenware Case Solution

The family should not tender their shares. Instead, they should let the company borrow , use $50 million to buy back shares from public holders, and use the other $50 million to pay a special $2.50 per share dividend to all shareholders (including the family). This achieves:

(0.848 × 9.725%) + (0.152 × 6.75% × 0.65) WACC = 8.247% + (0.152 × 4.3875%) = 8.247% + 0.667% = 8.914% By borrowing $100 million (not $50 million) and

Aim to buy back approximately 14 million shares.

This is the most debated part of the case. The risk-free rate (10-year Treasury) is approximately 4.5%. The market risk premium is 5.5%. BK’s beta (levered) is currently 0.85 because it has no debt. The family should not tender their shares

The Blaine Kitchenware case is a classic example of . The proposed leveraged recapitalization is financially sound, but the full $205 million debt version is suboptimal. A moderate leverage increase to 2.5x Debt/EBITDA, combined with strategic reinvestment, maximizes long-term shareholder value without sacrificing stability.

would likely occur at $100M debt, where the tax shield is larger and the leverage is still low-risk.