In April 2000, Ford Motor Co. announced a shareholder Value Enhancement Plan (VEP) significantly recapitalize the company’s ownership structure. Ford had accumulated $ 23000000000 in cash reserves and under the VEP would be as much as $ 10 billion of these funds to be returned to the shareholders. Is kept up to date in exchange for each share, the plan would give shareholders one new share and the choice of receiving $ 20 can pay in cash or additional new Ford common stock. Shareholders for cash would get b … Read more »

In April 2000, Ford Motor Co. announced a shareholder Value Enhancement Plan (VEP) significantly recapitalize the company’s ownership structure. Ford had accumulated $ 23000000000 in cash reserves and under the VEP would be as much as $ 10 billion of these funds to be returned to the shareholders. Is kept up to date in exchange for each share, the plan would give shareholders one new share and the choice of receiving $ 20 can pay in cash or additional new Ford common stock. Shareholders would receive cash will be taxed on these distributions on the capital gain. Among other things, the plan provided a means for the Ford family to without diluting its 40% voting rights (even though they have only 5% of outstanding shares) to obtain liquidity. Students must wrestle with the following questions: Why was Ford proposing this transaction instead of a traditional share repurchase program or a cash dividend? How have the interests of the Ford family factor in this decision, and what did the transaction imply about the future involvement of the family in society? Why was Ford distributing such a significant amount of cash at this particular point in time? The distribution has signaled a change in the society appetite for future acquisitions or investments? If shareholders collectively chosen to receive less than $ 10 billion in cash, as Ford would distribute the remaining money?
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Andre F. Perold
Source: Harvard Business School
17 pages.
Publication Date: Jan 22, 2001. Prod #: 201079-PDF-ENG
Ford Motor Co. ‘s Value Enhancement Plan (A) HBR case solution