The 4J representatives at the Operations Review meeting held earlier in the year expressed their concern at the weak performance of N, particularly in relation to the approach adopted to online and multi-channel business, which is lagging behind rivals. These activities are seen as an increasingly important element of the sales mix. Part of the problem for N is that many of its stores are within inner cities and do not have their own parking facilities. They are not easily accessible to customers who wish to collect larger electrical and home (household) products after placing their order.<?xml:namespace prefix="o" ns="urn:schemas-microsoft-com:office:office"></?xml:namespace>
A solution to this may be the purchase of a small supermarket chain, P, which operates throughout Country Z. P is one of the fastest growing supermarket chains recently expand rapidly via a series of merge and acquisitions. It has always been family-owned and the family now wants to sell the company. Most of the premises P occupies are on out-of-town sites with good parking facilities, and it is considered that this may be an opportunity for N to expand and diversify its business.
After several formal and informal approaches, not taking too long that the owner of P, Mr Yu, offered the sale of P for a consideration of Z$100 million, being the net asset value of P. (Exhibit A is the complete set of financial statements of P). The FD, being the sole representative of N’s board in dealing with the acquisition, verbally accepted the offer and informed all directors of N Company over the phone to prepare for the takeover of P. As the FD would be taking a vacation right after the meeting with Mr Yu, she hurriedly prepared a simple minute of the meeting, signed by all parties, and took the first plane to the beautiful islands of Bahamas.
Later when the FD returned to office one week after the vacation, she received an email from Mr Yu that the sale should not only be based on the net worth of P but also on the forecasted profitability, Mr Yu then raised the offering price to Z$200 million. Mr Yu believed that the offer was very reasonable considering the recovering world economy and the many similar offers received over the weeks.
Mr Yu’s new offer was bought into the last board meeting of N. The Chief Executive Officer (CEO) was very unhappy with Mr Yu’s revised offer and sought the board’s advice whether or not to file legal proceedings against Mr Yu. The FD, however, was indifference with the legal action. She has asked you to comment on this difficult situation, and meantime, to suggest an appropriate value of P for reconsideration.I
