MBA/540 – Maximizing Shareholder Wealth
Problem SolutionUniversity of PhoenixWeek Six November 3, 2008MBA/540 Maximizing Shareholder WealthBased on the scenario for Lester Electronics, Inc. we determined the company is heading in a new direction. Implementing the new vision began with the decision to merge LEI and Shang-Wa and will trickle down to employees to increase sales. While opposition is not an issue for the companies, a hostile takeover threat could conquer the efforts of merger completion. Efficient financing options will enable the new consolidated company to explore all avenues logically feasible and proceed to initiate the required steps. The overall outcome will be beneficial to the company, the employees and the shareholders.
Issue and Opportunity IdentificationLester Electronics (LEI) has been the sole distributor of capacitors for the consumer and industrial products manufactured by Shang-Wa. LEI never marketed this product outside the United States and managed to achieve and maintain annual revenue of $500 million. Shang-Wa allows LEI to renew this contract annually with the stipulation of purchasing $1 million wholesale for 65 years.
This agreement works well for both companies until recently when an offer was made by a competitor called Transnational Electronics Corporation interested in acquiring LEI. Due to growing demand Shang-Wa realizes more work is required although Mr. Lin is reaching his peak and prepares for retirement. In order to walk away from his company; Mr. Lin wants to ensure LEI is able to purchase this company and continue the growth opportunities currently in place.
LEI has decided to merge with Shang-Wa, as a stable and profitable company this merger will give Shang-Wa the finances required to remain competitive. One financing problem presented is the rate of growth for LEI compared to Shang-Wa, a basic rule to acquisition evaluation is to ensure NPV to shareholders is positive. Mergers do not always transpire...
... the company, the employees and the shareholders. Situation AnalysisIssue and Opportunity IdentificationLester Electronics (LEI) has been the sole distributor of capacitors for the consumer and industrial products manufactured by Shang-Wa ...