Effective "Estee-te" Tax Planning through Financial Engineering: Estee Lauder Companies, Inc.
This case examines the creative strategies that the Lauder family used to monetize their position in Est e Lauder Companies, Inc. in the 1990s while deferring their tax liability on the appreciated position. The strategies include the use of the company's initial public offering to engage in a short-against-the-box transaction and the issuance of hybrid securities known as TRACES. The case allows the students to consider a variety of monetization strategies and the tax and non-tax consequences to those strategies. Students are also exposed to estate tax planning, taxation of derivatives and tax risk issues.