Winco Case Write-Up
SWOT - Winco case
Strengths
• Largest sales volume (as believed by management) than any other similar chain or wholesale group in area of operations.
Weaknesses
• Growth via acquisitions, not internal growth
Opportunities
• Acquisitions (e.g., Taylor Markets)
Threats
• Heavy competition from national chains such as A&P, Kroger, and National Tea.
SWOT – Taylor Markets
Strengths
• Strong management
• Increase in number of stores
Weaknesses
• Declining sales in 1963
• Labor disputes
Opportunities
• Build out more stores
Threats
• Labor disputes
• Competition in the area
1) What action should Winco Distribution take with respect to the proposed acquisition of the Taylor markets, Inc.? If you conclude that Winco should make an offer for Taylor Markets, what is the maximum price that Winco should pay? If not, why not? Present the analysis underlying your conclusions and recommendations.
Although net income for Taylor Markets in the most recent year declined, a stable net income of $220k would be accretive to Winco and, therefore, Winco should acquire Taylor Markets. The maximum price that Winco should pay for Taylor Markets is about $2.5MM:
Some risks to note are the labor disputes (which resulted in net loss in 1963), declining net sales in 1964, and possible competition. These are partially offset by strong management that will continue to operate the company.
2) State the amount of funds which Winco will require through fiscal year 1968 to satisfy its financing needs. What sources (long term debt, convertible debentures, common stock, or some combination of these sources) in addition to the $5 million long-term debt already decided upon, should the company utilize to secure these needed funds? Explain why your recommendation is superior to other feasible alternatives.
Winco will require the $5MM to refinance its preferred stock and $2.5MM to fund its acquisition of Taylor Markets for a total of $7.5MM. The source of
Strengths
• Largest sales volume (as believed by management) than any other similar chain or wholesale group in area of operations.
Weaknesses
• Growth via acquisitions, not internal growth
Opportunities
• Acquisitions (e.g., Taylor Markets)
Threats
• Heavy competition from national chains such as A&P, Kroger, and National Tea.
SWOT – Taylor Markets
Strengths
• Strong management
• Increase in number of stores
Weaknesses
• Declining sales in 1963
• Labor disputes
Opportunities
• Build out more stores
Threats
• Labor disputes
• Competition in the area
1) What action should Winco Distribution take with respect to the proposed acquisition of the Taylor markets, Inc.? If you conclude that Winco should make an offer for Taylor Markets, what is the maximum price that Winco should pay? If not, why not? Present the analysis underlying your conclusions and recommendations.
Although net income for Taylor Markets in the most recent year declined, a stable net income of $220k would be accretive to Winco and, therefore, Winco should acquire Taylor Markets. The maximum price that Winco should pay for Taylor Markets is about $2.5MM:
Some risks to note are the labor disputes (which resulted in net loss in 1963), declining net sales in 1964, and possible competition. These are partially offset by strong management that will continue to operate the company.
2) State the amount of funds which Winco will require through fiscal year 1968 to satisfy its financing needs. What sources (long term debt, convertible debentures, common stock, or some combination of these sources) in addition to the $5 million long-term debt already decided upon, should the company utilize to secure these needed funds? Explain why your recommendation is superior to other feasible alternatives.
Winco will require the $5MM to refinance its preferred stock and $2.5MM to fund its acquisition of Taylor Markets for a total of $7.5MM. The source of