Continental Cablevision Inc./Fintelco Joint Venture

On February 1, 1994, the senior management team at Continental Cablevision met
to evaluate the terms of the proposed final agreement to establish a joint venture in
Argentina. The venture partner was Fintelco, a leading television-cable operator in
Buenos Aires. Despite Continental’s apparent jump on the competition, the senior
management team wanted to reassess the returns and potential risks associated
with conducting business in Argentina. You are hired to assess these potential
risks associated with the joint venture and go through your first emerging market
valuation.
1. Is entry into the Argentine market a good strategic move for Continental? Is
Fintelco an appropriate venture partner?
2. What are the major opportunities and risks you see in the venture?
3. Is $80 million for a 50% interest a fair value for Fintelco? (Assume a D/V ratio
of 25% for Fintelco)
4. There is a reading (Estrada (2007)) on Canvas about valuing offshore projects
using techniques proposed by Lessard, Godfrey and Espinosa (Bank of America),
Goldman Sachs, and Salomon Smith Barney. How do the approaches
differ? Which method do you prefer and why?
5. Would you suggest any modifications to the structure of the deal?