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    Deluxe Corporation: Adil Bouzoubaa Med Amine Bekkal Hafida Hannaoui Zineb Abdou

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    AmineBekkal
    Deluxe Corporation was founded in 1915 as a check printer and became the leader in that industry. By the 1970s and 80s, Deluxe processed over half of all checks in the US. However, demand for paper checks declined as electronic payments grew. In response, Deluxe undertook restructuring, closing plants and cutting staff. It also diversified into payment processing and financial consulting through spinoffs. In 2001, Deluxe's stock outperformed the market despite challenges from industry consolidation and technological changes reducing the need for paper checks. The CFO must now decide whether to issue dividends or repurchase more stock.

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    Deluxe Corporation: Adil Bouzoubaa Med Amine Bekkal Hafida Hannaoui Zineb Abdou

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    AmineBekkal
    213 views18 pages
    Deluxe Corporation was founded in 1915 as a check printer and became the leader in that industry. By the 1970s and 80s, Deluxe processed over half of all checks in the US. However, demand for paper checks declined as electronic payments grew. In response, Deluxe undertook restructuring, closing plants and cutting staff. It also diversified into payment processing and financial consulting through spinoffs. In 2001, Deluxe's stock outperformed the market despite challenges from industry consolidation and technological changes reducing the need for paper checks. The CFO must now decide whether to issue dividends or repurchase more stock.

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    Deluxe case study

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    Deluxe_G1

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    Deluxe Corporation was founded in 1915 as a check printer and became the leader in that industry. By the 1970s and 80s, Deluxe processed over half of all checks in the US. However, demand for paper checks declined as electronic payments grew. In response, Deluxe undertook restructuring, closing plants and cutting staff. It also diversified into payment processing and financial consulting through spinoffs. In 2001, Deluxe's stock outperformed the market despite challenges from industry consolidation and technological changes reducing the need for paper checks. The CFO must now decide whether to issue dividends or repurchase more stock.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    213 views18 pages

    Deluxe Corporation: Adil Bouzoubaa Med Amine Bekkal Hafida Hannaoui Zineb Abdou

    Uploaded by

    AmineBekkal
    Deluxe Corporation was founded in 1915 as a check printer and became the leader in that industry. By the 1970s and 80s, Deluxe processed over half of all checks in the US. However, demand for paper checks declined as electronic payments grew. In response, Deluxe undertook restructuring, closing plants and cutting staff. It also diversified into payment processing and financial consulting through spinoffs. In 2001, Deluxe's stock outperformed the market despite challenges from industry consolidation and technological changes reducing the need for paper checks. The CFO must now decide whether to issue dividends or repurchase more stock.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 18

    Deluxe Corporation

    Adil Bouzoubaa
    Med Amine Bekkal
    Hafida Hannaoui
    Zineb Abdou

    Outline
    Overview of Deluxe Corporation
    Case Issues
    Technical Part
    Conclusion

    History

    Founded in 1915 by a chicken-farmer-turned-printer in a one room


    print shop in St. Paul, Minnesota.
    Then, known as Deluxe Check Printers, the company was the
    leader in the emerging check printing business
    Deluxe Corporation became a publicly traded company in 1965, and
    traded on the New York Stock Exchange in 1980

    Background
    Deluxe processed more than 100 million check orders each yearnearly half of the U.S market.
    Deluxe Corporations revenues grew at a compound annual rate of
    12% between 1975 and 1995.
    This rate had declined as checks lost share to the electronic forms
    of payment

    Financial Performance

    As the decline in demand for paper checks, Deluxe undertook a


    major reorganization by :
    Reducing the number of its employees and facilities
    The company went form 62 printing plants to 13
    Reducing its labor force from 15000 to 7000
    By year-end 2001, Deluxes share price had grown by more than
    65% over the year, outperforming the S&P500 Index, which had
    fallen nearly 20%

    New Business Strategy


    In 2000, Deluxe annouced a major strategic shift with the spinoff of
    its technology-related subsidiaries, eFunds and iDLX Technology
    Partners.
    eFunds provided electronic-payment products and services
    iDLX offered technology-related consulting services to financial
    services companies

    Issues
    Firm had gone quite far in terms of share repurchase,
    now they only had an option of debt financing
    The check printing business was down and they did
    diversify from their core business but they did not do
    away with core business.
    Reorganization was done to reduce the operating
    expenses though the revenue growth kept falling
    Deluxe 2001 P/E ratio was 11.x which was much below
    the market P/E of 29.5

    Issues
    Ashley swenson, the chief financial officer, has
    to decide whether to payout dividends or
    repurchase the stock
    she has to decide the number of payout

    Issues
    The other risks are the fact that this is a matured market
    that is characterized by intense price competition. There
    is also growth in electronic payments which pauses a
    risk.
    Consolidation of banking sector will adversely impact the
    market of paper checks.
    Working capital turns results in reduction of net working
    capital in the first year and increases subsequently. Both
    of these require a tight asset management.

    Optimal Capital Structure

    80% Dividend Policy

    80% Dividend Policy

    Payement Old Debt

    Payement Old Debt

    Debt Increase

    Debt Increase

    CAPM
    requity = rf + equity*(rm rf)
    rf : 3.45% (5 year notes)
    : 0.85
    rm : 12.45%
    (Average S&P 500 1992-2001)

    requity = 11.10%

    Conclusion

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