In late December 2010, the chief investment officer at Cavalier Capital Event Funds, an event-driven merger arbitrage fund, learns of a $3.0 billion buyout of J.Crew at $43.50 per share by TPG Capital and Leonard Green & Partners, L.P. On the first day of trading following the announcement, J.Crew stock closes above the buyout price, at $43.99. In this case, students are asked to take the perspective of this CIO as he analyzes various aspects of J.Crew’s capital structure while preparing a discounted cash flow analysis in order to determine whether Cavalier should now take a stake in the company.

Case id: 110313