An activist fund (i.e. an institutional investor which seeks to change aspects of a company's operations)...

 

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An activist fund (i.e. an institutional investor which seeks to change aspects of a company's operations) has taken a 5% shareholding in Sleepy plc and is agitating for a more aggressive capital structure. Sleepy plc currently has no debt and is a mature business in a 'slow moving' industry with very limited new investment opportunities. Based on a comparison with industry peers, Sleepy could raise debt equivalent to 1.5 times EBITDA at an interest rate of circa 4.6% without creating any notable risk of financial distress or compromising its future growth opportunities. Sleepy has very stable EBITDA of $21 million per annum and pays corporation tax at 22%. It's WACC is approximately 10%. How much shareholder value approximately could Sleepy arguably create by raising 1.5x EBITDA in debt and repaying that amount to shareholders (insert answer in millions to 3 decimal places without $ symbol i.e. X.XXX)? An activist fund (i.e. an institutional investor which seeks to change aspects of a company's operations) has taken a 5% shareholding in Sleepy plc and is agitating for a more aggressive capital structure. Sleepy plc currently has no debt and is a mature business in a 'slow moving' industry with very limited new investment opportunities. Based on a comparison with industry peers, Sleepy could raise debt equivalent to 1.5 times EBITDA at an interest rate of circa 4.6% without creating any notable risk of financial distress or compromising its future growth opportunities. Sleepy has very stable EBITDA of $21 million per annum and pays corporation tax at 22%. It's WACC is approximately 10%. How much shareholder value approximately could Sleepy arguably create by raising 1.5x EBITDA in debt and repaying that amount to shareholders (insert answer in millions to 3 decimal places without $ symbol i.e. X.XXX)?