Harvard Business School Case "Hostile bid for Red October." Why did
Koloss want to buy Red October?

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Request for Question Clarification by missy-ga on 29 Jul 2002 20:48 PDT

Darden Graduate School of Business asks exactly this question in its
Emerging Markets Finance class:

http://faculty.darden.virginia.edu/liw/em/session_5.htm

Are you seeking additional sources to back up your own research?

--Missy

Dear carrera996,

Thank you for your question: Why did Koloss want to buy Red October?
While I believe it is valid to make qualitative comments about
diversification, cost-savings and synergies - the simple answer is
Koloss believed Red October was undervalued at its offer price. Hence
the crux of the answer is to place a value upon Red October and
compare it to the bid. While Ladrido has applied a number of different
methods to valuation – I think the analysis could be improved by
inclusion of a discussion about the risks associated with investing in
emerging markets and their affect upon valuation. Highlighting the
differences in valuation between investing in say the United States
market and in an emerging market would provide a far superior answer:

Ladrido, Joseph’s paper appears to provide an appropriate structure
for the answer to your question…
http://www.ladrido.net/12-RedOctoberCase.htm

Li, Wei: Returns on different emerging markets asset classes 
http://faculty.darden.virginia.edu/liw/em/red-october.ppt
Valuation questions referred to by missy
http://faculty.darden.virginia.edu/liw/em/session_5.htm
Risks of Emerging Markets overview: virtually all the links from
session 5 (except 9) onwards provide valuable valuation model
information.
http://faculty.darden.virginia.edu/liw/em/

Red October Annual reports
http://www.redoct.msk.ru:8100/eng/holder/reports/
http://www.redoct.msk.ru:8100/eng/about/news/

Devane, Ross: Interesting comments about investing in Russia
http://www.amber.ucsf.edu/homes/ross/public_html/russia_/debate7.txt
Russia in general:
http://www.amber.ucsf.edu/homes/ross/public_html/russia_/

Search strategy
valuation of "red october"

I hope I have provided you with the necessary research for a high
quality answer to your question.

Please select clarify answer if you would like further research.

Regards,

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Request for Answer Clarification by carrera996-ga on 30 Jul 2002 19:47 PDT

Darden does not really answer the question in its PowerPoint presentation.

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Clarification of Answer by ozguru-ga on 30 Jul 2002 20:18 PDT

Dear carrera996,

I am not sure your clarification was directed towards my answer,
however I did receive the notice. I agree the powerpoint presentation
did not provide the answer, it was provided as a supplementary link.

Have you had a chance to substitute the Red October numbers into the
various valuation models mentioned on Darden? I believe therein lies
your answers, combined with information from Ladrido.

Regards,