In this case study, we will talk about negotiate a possible acquisition of Flinder Valves and Controls. Inc by RSE International Corporation. To know why they gave that decision and how they could do it. We will have an overview of these two companies.
1. Overview of Flinder Valves and Controls. Inc and RSE International Corporation 1.1 Flinder Valves and Controls. Inc
Flinder Valves and Controls. Inc (FVC) was an American company, located in Southern California. FVC was an outgrowth of a small company established in 1980 for engineering and developmental work on an experimental heat-exchanger product. In 1987, Flinder Valves and Controls Inc. was organized to acquire the properties of the engineering corporation. Bill Flinder, the president of the predecessor continued as the president of FVC. In 1996, Flinder Valves was taken public, Auden Company, which later became a holder of 20% of FVC common stock. Auden negotiated to merger but after the news of the proposed merger became public, Auden withdrew from the discussions. Defense and aerospace industries were the products bring almost profits for FVC. Such products required extensive engineering experience; this means that FVC had well skilled workers and modern factories. The raw material used by company were supplied from a number of competitive suppliers. This would bring to FVC goodwill, such as price, payment methods… In addition, FVC had a good system distribution. They had staffs of skilled sales engineers. The Auden Company, a large firm in related field, was an important foreign distribution channel under a nonexclusive distributor arrangement. Recent introduction of new products brought huge sales to FVC, sales in the first quarter of 2008 grew 23% over the corresponding period in 2007 whereas other companies had limited growth prospects. FVC’s plants, all of modern construction, were efficient handling of small production orders. They needed to gain production know-how for high-volume manufacturing. That was a small plant, needed a deep- pocketed partner to expand. Not only have modern plants, the main plant was also served by switch tracks in a 15-car dock area of a leading railroad and by a truck area for the company’s own fleet of trucks. 70% of the Flinder Valves stock was held by its board of directors and their families, including the 20% owned by the Auden Company and 40% owned by Bill Flinder. The Auden Company did not object to the merger, but they would sell their holdings of FVC stock. Because Flinder was 62 years old and nearing retirement, but he did not believe that new chief executive could bring his responsibility and develop FVC, so he wanted to sell FVC. FVC’s stock had a beta of 1.00, based on the most recent year’s trading prices.
1.2 RSE International Corporation
RSE had been founded in 1970, was grown, taken in public and was rooted as a Russell 1000 company. RSE manufactured a broad range of products including advanced industrial components as well as chains, cables, nuts and bolts, castings and forgings, and other similar products. A second division produced a wide range of nautical navigation assemblies and allied products. The third division manufactured a line of components for missile and fire-control systems. The company’s raw material supply (sheets, planets, and coils) of various metals came from various producers. It means that they would have best choices in choosing producers. RSE International’s plants were ample, modern, well-equipped with substantially newer machinery, and adequately served by railroad sidings. They also had good conditions to manufacture and transport. RSE was interested in FVC because FVC was developing an advanced technology, which was expected to have broad commercial value if the results were found to be economically successful. RSE International’s stock had a beta of 1.25, based on the most recent year’s trading prices.
2. What would be benefit if RSE International Corporation merger...
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