Finance 4400 Report Paper
Introduction
On Monday, September 8, 1988, Greg Rudka, managing director at Scotia Capital, called James Vaux to office to discus about a story that has appeared in the newspaper that morning. There is a resignation of former president and chief operation officer in Oshawa Group Limited. Their client Empire Company Limited interested in takeover Oshawa to expanding beyond their Atlantic Canada roots.
Decisions need to be made
James Vaux needs to determine whether use debt or equity to finance the acquisition of Oshawa Group Limited.
Factor to Consider
1）The Grocery Business Environment in Canada
The grocery business was a mature industry. In 1998 grocers faced increasing competition not only from other grocers, but also increasingly from various non-traditional vendors including drug stores, discount retailers, wholesale clubs and internet-based operations.
2）The key Success Factors in Canada
On the revenue side, growth occurred primarily through horizontal merger and acquisition activity. First, it was generally cheaper to acquire a competitor than to open new stores. Acquisition also mitigated risks associated with entering a new market including lack of local knowledge, difficulty of attracting a qualified work force and the threat and intensity of competitive response. Horizontal acquisition activity also generated the economies of scale in marketing, procurement, distribution, technology, and corporate overhead and private-label development.
3）The Strength of Oshawa Group Limited：
Business advantages:
The Agora food merchants is second largest food retailer. It provides Oshawa a strong source of revenue; the food retailer generates most portion of revenue.
The SERCA foodservice was Canada’s largest foodservice business and distributed a full line of grocery. It provides the company a strong competitive advantage in foodservice and distribution line in Canada. Company may reduce cost and taking advantages of product pricing.
Geographic
On Monday, September 8, 1988, Greg Rudka, managing director at Scotia Capital, called James Vaux to office to discus about a story that has appeared in the newspaper that morning. There is a resignation of former president and chief operation officer in Oshawa Group Limited. Their client Empire Company Limited interested in takeover Oshawa to expanding beyond their Atlantic Canada roots.
Decisions need to be made
James Vaux needs to determine whether use debt or equity to finance the acquisition of Oshawa Group Limited.
Factor to Consider
1）The Grocery Business Environment in Canada
The grocery business was a mature industry. In 1998 grocers faced increasing competition not only from other grocers, but also increasingly from various non-traditional vendors including drug stores, discount retailers, wholesale clubs and internet-based operations.
2）The key Success Factors in Canada
On the revenue side, growth occurred primarily through horizontal merger and acquisition activity. First, it was generally cheaper to acquire a competitor than to open new stores. Acquisition also mitigated risks associated with entering a new market including lack of local knowledge, difficulty of attracting a qualified work force and the threat and intensity of competitive response. Horizontal acquisition activity also generated the economies of scale in marketing, procurement, distribution, technology, and corporate overhead and private-label development.
3）The Strength of Oshawa Group Limited：
Business advantages:
The Agora food merchants is second largest food retailer. It provides Oshawa a strong source of revenue; the food retailer generates most portion of revenue.
The SERCA foodservice was Canada’s largest foodservice business and distributed a full line of grocery. It provides the company a strong competitive advantage in foodservice and distribution line in Canada. Company may reduce cost and taking advantages of product pricing.
Geographic