Proposed Acquisition

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Proposed Acquisition from the Whistle Coffee Bar

Discussion

The business development director of the Whistle Coffee Bar (WCB) for the UK, Matt Jenkins has approached Zubinos Coffee Shop (Zubinos) at the end of February 2006 with a proposal to acquire Zubinos. The bid is identified as a threat to the current management team, and Luis Zubino is adamant that he does not want to sell his shares to WCB.

Luis Zubino owns 30% holding of Zubinos shares. Together with his wife Vivien’s shares, their shares constitute 42% holding which is the bigger holding than anybdy else’s. However, the major shareholder, KPE holds 40% of the shares and their main objective is to achieve growth in the value of their shares.

WCB made an acquisition proposal for a cash price of £15.00 per Zubinos share, which increase, to £18.00 afterwards. The proposal made appears to be very attractive since cash is offered, and KPE considers this could be a possible exit route for them. It is worried that KPE may accept the offer if the offer is attractive for them.

It should be noted that WCB is an international listed company, operates in both the UK and Europe. Its operations are much bigger and stronger than Zubinos, and its P/E ratio is above the average ratio of the same industry. Therefore, this acquisition is a hostile take over by competitor.

In addition, Zubinos had been competing with WCB over the rented sites for new coffee shops that WCB were also trying to secure. If WCB successfully acquires Zubinos, synergies of both companies’ operations are likely to arise and economies of scale could be achieved from this acquisition.

Zubinos is considered as a high growth start-up firm, since it is only formed in March 2011. By February 2006, Zubinos has just operated in the market for less than 5 years. Usually for high growth start-up firm, they grow rapidly, and have high gearing. In the case of Zubinos, it exactly fulfills these characteristics - expanded so rapid,...
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