Risk Analysis of Primark

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Primark Corp. was emerging as a leader in the global information services industry in the mid-1990s. Through its four major divisions, the company focused its information services on financial, weather, and information technology markets. Primark also provided miscellaneous transportation and financial services. Primark was basically a utility company until 1987, when it exited that business and forged into information services. Primark originated from the early 1980s spin-off of Michigan Consolidated Gas by American Natural Resources. At the time, American Natural Resources was operating two primary subsidiaries: Michigan Consolidated Gas, which was a distributor of natural gas serving the Detroit area, and a sister company that operated an interstate gas pipeline. Although the two companies seemed to complement each other, regulatory constraints were stifling potential synergies. The gas pipeline company, which was regulated at the federal level, was highly profitable. In contrast, Michigan Consolidated had long suffered from tepid earnings and thin rate increases. The main problem was that Michigan regulators had been unsympathetic to rate hike requests because American Natural Resources generated so much profit from its gas distribution company. Frustrated with the situation, American Natural Resources decided to jettison its lagging Michigan Consolidated Gas subsidiary in 1981. The new enterprise formed the basis for the creation of Primark Corp., which became the parent of Michigan Consolidated Gas in 1982. The new company was initially headed by Robert Stewart, who stayed with the spun-off subsidiary as chairman. Under his direction, Michigan Consolidated thrived. Its early success was primarily the result of rate hikes; Michigan regulators were forced to give Michigan Consolidated rate increases that would allow the company to survive on its own. Although the company continued to churn out sales of about $1.1 billion annually, its profits began to rise....
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