Financing Ciba


Ciba-Geigy is a Swiss-based worldwide producer of pharmaceutical, agricultural and chemical products. It operates in 60 countries, employs 90,000 people and in 1992 had group sales in excess of $15 billion equivalent. It expenditures on research and development are heavy, reaching approximately $1.7 billion equivalent in 1992. Capital expenditures exceeded $1.3 billion.

Assume you have been invited to a meeting with Ciba-Geigy's top financial managers to discuss their debt strategy.

Look at the information about Ciba-Geigy. Based on the nature of its business and the characteristics of its assets, what would you think about the optimal way in which the company should be financed?

Consider the following:

• How much debt should Ciba-Geigy have in relation to equity? What is its actual debt-equity ratio, and what would you advise the company?

• Should the debt be fixed or floating? How much of the debt is fixed? What would you advise the company?

• How much of the company's debt should be long term?

• Based the distribution of Ciba's sales and assets, what should be the currency composition of its debt? What is it in fact, and what would you advise the company?

 

Exhibits

A Suggested Solution


Ian Giddy
ian.giddy@nyu.edu