Lester Electronics Inc. (LEI) is a public company that trades on NASDAQ and its main source of income is the distribution of electronics components to different location within the United States. The company currently makes $500 millions in revenue per year and is the exclusive distributor for Shang-Wa Electronics a manufacturing company located in Japan. Shang-Wa Electronics is a Korean- base capacitor manufacture that supplies small electrical components to LEI for distribution at US markets base on the conditions stipulated on the 65 years exclusive distribution agreement between Bernard Lester, CEO Lester Electronics and John Lin, CEO Shang-Wa Electronics.
Bernard Lester knows that TEC is very interested in acquiring Shang-Wa. He knows that John Lin wants to implement a manufacturing facility with LEI but there is also the possibility that LEI could acquire Shang-Wa. LEI is currently evaluating the merger with Shang-Wa and with the completion of the merger LEI will focus on maximizing shareholders wealth, expand its market share, increase profitability and increase its product base. The results are discussed in the following pages.
Issue and Opportunity Identification
Lester Electronics is facing the decision to merge with Shang-Wa Electronics or not. If LEI does nothing, they will lose up to 43% of their expected revenues for the next 5 years since Shang-Wa will be acquired by LEI most aggressive competitor Transnational Electronics Corporation (TEC). In evaluating the current issues that LEI is going through, Bernard Lester open the doors to a number of options available to avoid the takeover of Shang-Wa. One option is to joint forces with Shang-Wa to expand their companies implementing a new manufacturing facility in a nearby Asian country to meet the growing demand. Bernard Lester will have to take into consideration issues such as language barriers, cultural shock, going into manufacturing... [continues]
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