O.M. Scott and Company

Paper Summary:

In this article, the writer explains that the O.M. Scott leveraged buyout case was an example of 1980s creative financing, in which a large corporation in deep debt was able to not only be bought out by a company it then took over, but gained momentum and credit credibility. The writer further explains that O.M. Scott manufactures, markets and sells lawn care and garden products; and provides garden maintenance services. The writer points out that O.M. Scott & Sons was sold and became a closely held company following the war, when, in 1971, it was bought out by ITT. O.M. Scott & Sons remained within the conglomerate until 1986. In this article, the writer looks at related problems and discusses possible alternative courses of action.

Outline:
Introduction
Background of Company
History
Analysis of Case
Major Problems
Alternative Course of Action
Analysis of Alternatives
Conclusion

From the Paper:

"At the end of fiscal 1961, Scott and its subsidiaries had $16.2 million of long-term debt outstanding, $12 million in renewable five-year subordinated notes of the parent company held by four insurance companies and a trustee, and $4.2 million in publicly held bonds owed by Scotts Chemical Plant, Inc., a wholly-owned subsidiary."
"The governing loan indenture limited the company's maximum outstanding debt to an amount not greater than three times the company's "equity working capital" as of the preceding March 31. The note indenture restricted outstanding subordinated notes to only 60% of maximum allowed debt. The agreement also required that Scott be free of bank debt for 60 consecutive days each year and that the company earn before taxes one and a half times its fixed financial charges, including interest on funded and unfunded debt, amortization of debt discount, and rentals on leased properties."

Sample of Sources Used:

• Corporate Watch, Scotts: A Corporate Profile. 2006. Website <http://www.corporatewatch.org.uk/?lid=367>.
• Cuomo, Andrew. The Secret Hazards of Pesticides. Office of the New York State Attorney General, Environmental Protection Bureau, (Audit Report E1EPF1-05-0117-1100378, Sept. 27, 1991) 1996.
• Pederson, J.P. The Scotts Company, International Directory of Company Histories, 22:474-476. 1998.

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