Summary of Szln: Acquiring Pem Case Study

In: Business and Management

Submitted By cheolsu
Words 663
Pages 3
In 2008 Zhang Shuijian, the chief executive officer (CEO) of SZLN, and his management team had identified an opportunity to acquire PEM. The team has to determine the following:-
- Calculate the maximum price SZLN would be willing to pay.
- Strategic benefits of this acquisition
- The risks that might be incurred as a result of the acquisition

Zhang Shuijian and his team needed to design an acquisition proposal that could increase the long-term shareholder value of SZLN, meet the requirements of both Chinese and Australian regulators, and satisfy the board and shareholders of PEM.

Three other possibilities anticipated by SZLN anticipated at least three possibilities:
− Offer a cash tender in the market,
− Purchasing newly issued PEM treasury shares directly from the company to become the largest shareholder, and
− Financing the purchase with convertible bonds and then converting the bonds into common shares at some future time.

Because of SZLN’s alignment with Chinese government strategy, its relatively strong financial structure, its relationship with Chinese banks and the cash flow prospects from the investment, SZLN anticipated it could borrow sufficient U.S. dollar funds from Chinese banks to make the acquisition in cash if required.

The date we have:-

Lead and zinc prices in 2007 fluctuated like a roller coaster. In a review of the competitive situation in 2008, SZLN made the following key observations:

The top 10 domestic lead zinc companies was less than 50 per cent of domestic total capacity, which indicated a fragmented industry.

In 2007, upstream companies expanded downstream, and some downstream companies extended to upstream business, illustrating a trend to vertical integration. Industry competition intensified as a result of capital market developments. Because the stock market had performed abnormally well in 2007, many…...

Similar Documents

Szln: Acquiring Pem

...Case #3 SZLN: Acquiring PEM, Group 9, Financial Management 1. What strategic opportunities and risks should SZLN take into account when assessing the acquisition? When considering the acquisition of PEM, SZLN must make sure meeting the requirements of both Chinese and Australians regulators. The acquisition has the following opportunities: - The ore mined by SZLN was not enough for its required capacity, by acquiring PEM it can get the needed capacity. - PEM was a world known lead zinc mining company, the acquisition of such a company can enable SZLN to achieve the platform it needed for international expansion. - SZLN and PEM each had advanced mining technologies, the combination of such technologies can give them a competitive advantage. - PEM also had operational and efficiencies SZLN could lean from. The acquisition has the following risks: -There are Managerial and cultural risks related to cross-border acquisitions by Chinese companies. this kind of acquisitions by Chinese companies had bad experience in the past, and considering the unsuccessful past experience - this acquisition is under a high risk. 2. Determine the value of the PEM shares to SZLN by employing (1) discounted cash flow using the free cash flow to equity method, Refer to the attached excel sheet named 'question 2' (2) the comparable transactions method. The purpose of the comparable transaction method is to evaluate a project by comparing the project with......

Words: 448 - Pages: 2

Sunshine Fashions- Summary of Case Study

...Sunshine Fashion Case Study Questions Q 1. What are the root causes – individual and contextual -- for the employee misbehavior at Sunshine? Ans 1. Individual misbehaviour in any organisation is not only dependent on an individual’s psychology but is also affected by many variables such as the Organisation structure, Work environment, operating procedures etc. However, the phenomenon of misbehaviour can be better understood in terms of motives and opportunity. Employees commit unethical conduct because of one of the motives of - greed, financial benefit, or other individual motivations and these motives flourish in the absence of effective monitoring mechanisms and effective leadership in the work environment. Sunshine Fashions’ organisational hierarchy and work ethics provided ample motives and opportunities to the employees to indulge in fraud and misbehaviour. The specific root causes for employee misbehaviour at Sunshine can be listed as below:- Root Causes for Individual Misbehaviour (a) Lack of loyalty and belongingness - The employees of sunshine lacked loyalty and belongingness towards the company and this led to opportunistic behaviour. This may be attributed to poor organisation culture, selection process, training, and transparency in company working or leadership issues. (b) Greed – The employees wanted to make quick money through the loop holes in the system. (c) Poor leadership/role models (d) Effects of witnessing similar acts committed by...

Words: 1383 - Pages: 6

Szln Pem Case

...S SZLN: ACQUIRING PEM w 910N07 Xingyun Liu, Lifan Wu and Jim Hatch wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2010, Richard Ivey School of Business Foundation Version: (A) 2010-09-28 As the financial crisis became more severe in early 2008, the prices of base metals, such as zinc and lead, declined greatly. As a result, many mining companies suffered significant operating losses and experienced extreme difficulty obtaining financing from the capital markets. Consequently, some companies had to either sell some of their assets or find a strategic buyer. In late November 2008, Zhang Shuijian, the chief executive officer (CEO) of Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd. (SZLN), and his management team had identified an......

Words: 8880 - Pages: 36

Acquiring Pem

...http://www.casetutors.com/12186/SZLN:-Acquiring-PEM.html http://tyc66m.com/essay-on/Szln-Acquiring-Pem/109640 Case #3 SZLN: Acquiring PEM, Group 9, Financial Management 1. What strategic opportunities and risks should SZLN take into account when assessing the acquisition? When considering the acquisition of PEM, SZLN must make sure meeting the requirements of both Chinese and Australians regulators. The acquisition has the following opportunities: - The ore mined by SZLN was not enough for its required capacity, by acquiring PEM it can get the needed capacity. - PEM was a world known lead zinc mining company, the acquisition of such a company can enable SZLN to achieve the platform it needed for international expansion. - SZLN and PEM each had advanced mining technologies, the combination of such technologies can give them a competitive advantage. - PEM also had operational and efficiencies SZLN could lean from. The acquisition has the following risks: -There are Managerial and cultural risks related to cross-border acquisitions by Chinese companies. this kind of acquisitions by Chinese companies had bad experience in the past, and considering the unsuccessful past experience - this acquisition is under a high risk. 2. Determine the value of the PEM shares to SZLN by employing (1) discounted cash flow using the free cash flow to equity method, Refer to the attached excel sheet named 'question 2' (2) the comparable transactions method. The...

Words: 641 - Pages: 3

Szln Acquiring Pem

...Subjective traders they are intertwined with their trades.Their signals are generally entering out of greed and exiting based on their own internal fear. The believe in their opinions more than the actually price action. They base trades off of whether they are feeling good or bad about a particular trade. A subjective trade comes out of the imagination of the trader, from their own beliefs, opinions, and what “should” happen in their view. Many times reality is not even cross checked as a reference, and if it is the subjective traders sees what they want to see instead of what is really going on. Their compass is their emotions and they have internal goals other than making money. Objective: (Of a person or their judgment) not influenced by personal feelings or opinions in considering and representing facts. Having actual existence or reality. Objective traders have a quantified method, a system, rules, and principles they trade by. They know where they will get in based on facts, and where they will get out based on price action. Objective traders have a written trading plan to guide them. The guides of the objective trader is historical price action, charts, probabilities, risk management, and their edge. They react to what is happening in reality in quantifiable terms that can be measured. They go with the flow of price action not the flow of internal emotions. Don’t be inside of your trade emotionally and don’t attach your ego to it. Be the trader that witnesses the......

Words: 311 - Pages: 2

Szln and Pem Case

...SZLN And PEM Case Join AllFreePapers.com Category: Business Autor: antoni 04 October 2012 Words: 584 | Pages: 3 Question 1 What strategic opportunities and risks should SZLN take into account when assessing the acquisition? Opportunities - Utilize PEM's production capacity to support SZLN's underutilized smelters; - Significantly improve the grades of zinc and lead ore for production, which would greatly reduce the costs for SLZN in its production; - Possible capital gain after acquisition as the market recovers; - SZLN and PEM could draw advanced mining technologies from each other; - SZLN could improve its operational and managerial efficiencies by learning relevant skills from PEM; - Provide a platform to SZLN for future international expansion; Risks - Cultural differences between two countries; - Political risks  The FIRB may rule the acquisition unfavourable to SZLN as SZLN's intention is to gain control over PEM and the FIRB may find it to be against the national interest of Australia;  The supervision body SASAC in China may also find that SZLN's acquisition does not amount to efficient use of foreign exchange reserves, even though the overall strategy is to ‘go global'; - Market condition may continue deteriorating and the acquisition may then lead to massive losses to SZLN; - Risk of overpayment due to shareholders' holdup problem; Question 2 Determine the value range of PEM based on comparable transactions. Can PEM be valued......

Words: 633 - Pages: 3

Case Study

...S SZLN: ACQUIRING PEM w 910N07 Xingyun Liu, Lifan Wu and Jim Hatch wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2010, Richard Ivey School of Business Foundation Version: (A) 2010-09-28 As the financial crisis became more severe in early 2008, the prices of base metals, such as zinc and lead, declined greatly. As a result, many mining companies suffered significant operating losses and experienced extreme difficulty obtaining financing from the capital markets. Consequently, some companies had to either sell some of their assets or find a strategic buyer. In late November 2008, Zhang Shuijian, the chief executive officer (CEO) of Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd. (SZLN), and his management team had identified an......

Words: 8880 - Pages: 36

Szln

...S SZLN: ACQUIRING PEM w 910N07 Xingyun Liu, Lifan Wu and Jim Hatch wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2010, Richard Ivey School of Business Foundation Version: (A) 2010-09-28 As the financial crisis became more severe in early 2008, the prices of base metals, such as zinc and lead, declined greatly. As a result, many mining companies suffered significant operating losses and experienced extreme difficulty obtaining financing from the capital markets. Consequently, some companies had to either sell some of their assets or find a strategic buyer. In late November 2008, Zhang Shuijian, the chief executive officer (CEO) of Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd. (SZLN), and his management team had identified an......

Words: 8880 - Pages: 36

Case Study Summary

...Clinical Case Study Summary of Hyponatremia The drug MDMA, 3,4-methylenedioxymethamphetamin, commonly known as ecstasy leads to feelings of euphoria, emotional empathy, and increased energy. Hyponatremia is an electrolyte disturbance in which the sodium ion concentration in the plasma is lower than normal. Sodium is the dominant extracellular cation (positive ion) and cannot freely cross from the interstitial space into the cell, because charged sodium ions attract up to 25 water molecules around them, creating a large polar structure that is too large to pass through the cell membrane. In this study we looked at the case of one young college student who passed away from using ecstasy, as well as two other different examples from a marathon runner and a post surgical patient. One of the most serious medical complications of ecstasy abuse is related to symptomatic hyponatremia. The cause of hyponatremia seen with ecstasy is dilutional in nature and likely due to several interacting effects. Excessive water intake has been directly associated with ecstasy use. For partygoers the effects of amphetamines induce dry mouth and the sensation of thirst causing the user to over hydrate especially after a long night of dancing. For marathon runners, excess antidiuretic hormone (ADH, also known as vasopressin) can be released from the result of strenuous physical activity. The treatment of hyponatremia depends on the underlying cause and whether the patient's blood volume status is......

Words: 554 - Pages: 3

A Social Worker Case Study Summary

...A Social Worker Case Study Phoenix A Social Worker Case Study The social worker in the case study displays characteristics of an effective helper. An effective helper has accurate empathy for her clients (O'Hagan, 2007). The helping relationship begins with the development of trust and empathy. The worker seems to understand the clients’ pain. Compassion and understanding assist the helper to identify with a problem. The employee acknowledges how heartbreaking it is to watch the family submit the care of their loved ones to the institution. The worker has absolute desire to help the clients recover. She reveals warmth as she interacts daily with residents, families, and staff in the institution. Values are important in influencing the use of her skills. Professional ethics guides her actions. The social worker treats the residents with respect, dignity, and integrity. As a human service professional, she is expected to maintain confidentiality about clients’ condition except in cases where there is suspected danger or harm to themselves or others (Doel, 2012). Her prior work experience motivated the use of her skills. She is thorough in what she does. She obtains a comprehensive psychological report on each client and draws decisions from the history obtained from the assessments. At community level, the social worker plays the role of advocacy. She is persuasive, assertive, and patient in her......

Words: 355 - Pages: 2

Virgin Mobile Case Study Summary

...VIRGIN MOBILE CASE INTRODUCTION: Virgin is a leading branded venture capital organization. It is conceived in 1970 by Sir Richard Branson, the Virgin Group has gone on to grow very successful business in sectors ranging from mobile telephony, to transportation, travel, financial services, leisure, music, holidays, publishing and retailing. Virgin has created more than 200 branded companies worldwide, employing approximately 50,000 people, in 29 countries. TARGET MARKET: The core-competency of Virgin mobile is making a difference in the eyes of the customer in terms of value for money, Quality, Innovation, Fun, A sense of Cool-ness. It identified the age segment where the Industry penetration was the lowest, that is, between 15 years to 29 years of age. Also, by demography, it targeted income segment with a low disposable income and high aspiration for trendiness. Since the target market for Virgin mobile is youth segment, it makes sense to develop a value proposition like VirginXtras. The revenue for mobile entertainment is projected to increase in the next few years (Exhibit 3). So, by offering value added services like delivering music, video and game content of MTV, VH1, and Nickelodeon etc. Virgin can increase its sales. PRICING STRATEGIES FOR THIS SEGMENT: Option 1 – Clone the industry prices Pros: Easy to promote, No need to spend more money on salespeople, Customers are used to ‘buckets’ and peak / off – peak distinctions Cons: Highly competitive market....

Words: 564 - Pages: 3

Lab 2 Case Study Executive Summary Is3350

...Executive Summary on Veteran’s Affairs (VA) and Loss of Private Information On 3 May 2006, a Department of Veterans Affairs (VA) laptop was stolen from a VA data analyst’s home in Montgomery County, Maryland. In addition to the laptop, a personal external hard drive was stolen. The external hard drive contained the personal data (names, social security numbers, dates of birth, disability ratings) for 26.5 million veterans and their spouses. It should be noted that the massive data theft was only one of many that had been discovered over the course of 1.5 years. Upon discovery of the theft, the VA employee immediately notified the local police and his supervisors. His supervisors did not notify the Veterans Affairs Secretary until 16 May 2006. On 17 May 2006, the Veterans Affairs Secretary notified the FBI, who began to work with the Montgomery County police to investigate the theft. There were two main issues in this incident that I identified. Issue 1 was the VA employees had authorization to access and use the VA databases for performance of his duties. He was not authorized to take it home as he had no official need to have the data at home. The private data was not properly safeguarded. He failed to password protect (at the very minimum) and encrypt it. Issue 2 was the response of managers and senior executives regarding the notification of stolen data were inappropriate and not timely. They failed to determine the magnitude of the data loss. There was a failure......

Words: 336 - Pages: 2

Szln Acquiring Pem

...SZLN: ACQUIRING PEM In late November 2008, Zhang Shuijian, the chief executive officer (CEO) of Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd. (SZLN), and his management team had identified an opportunity to acquire Perilya Limited (PEM), Before making an offer, the team needed to determine: * the strategic benefits of this acquisition, * the risks that might be incurred as a result of the purchase and * the maximum price SZLN would be willing to pay. The prices of lead and zinc in 2007 fluctuated like a roller coaster. In a review of the competitive situation in 2008, SZLN made the following key observations: According to the data, the total capacity of the top 10 domestic lead zinc companies was less than 50 per cent of domestic total capacity, which indicated a fragmented industry. • In 2007, upstream companies expanded downstream, and some downstream companies extended to upstream business, illustrating a trend to vertical integration. • Industry competition intensified as a result of capital market developments. Because the stock market had performed abnormally well in 2007, many companies had taken the opportunity to issue additional shares to raise money for possible merger and acquisition opportunities. SZLN also raised money so it could expand, in hopes of surviving the imminent industry consolidation. • Clearly, the government intended to consolidate the industry. As a result SZLN would likely either acquire other companies or would be......

Words: 734 - Pages: 3

Szln Acquiring Pem

...risks should SZLN take into account when assessing the acquisition? Opportunities: 1. It is necessary for SZNL to make acquisition, in order to get more ore for feeding its manufacturing operations. 2. Due to consolidation of the industry by the government it is better for SZLN to acquire other companies or would be acquired. 3. Ability to provide a platform for future international expansion. 4. Becoming more safe with ore supply and thus to become more competitive as lead/zinc + metal products producer on the world market. 5. Getting the synergy effect from PEM management and operation efficiency management. Moreover, the ability to improve mining technologies from each other. 6. Purchasing of attractive mines for a cheap price and future value rise after predictable increase in resources price. In other words the opportunity of capital gain after the market recovery. Risks 1. Political risks from both sides. On the one hand, the supervision of SASAC in China, that controls the efficiency of using of foreign exchange reserves, political relationship with the investee country and following the “global strategy”. On the other hand the impact of FIRB, that can find the acquisition to be against the national interest of Australia. 2. Risk of involving in long negotiation process with possible negative result. 3. Cultural differences between countries. 4. Risk of market deteriorating that can lead to losses for SZLN. 5.......

Words: 788 - Pages: 4

Acquiring Pem

...S w 910N07 SZLN: ACQUIRING PEM Xingyun Liu, Lifan Wu and Jim Hatch wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright © 2010, Richard Ivey School of Business Foundation Version: (A) 2010-09-28 As the financial crisis became more severe in early 2008, the prices of base metals, such as zinc and lead, declined greatly. As a result, many mining companies suffered significant operating losses and experienced extreme difficulty obtaining financing from the capital markets. Consequently, some companies had to either sell some of their assets or find a strategic buyer. In late November 2008, Zhang Shuijian, the chief executive officer (CEO) of Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd. (SZLN), and his management team had identified an......

Words: 8892 - Pages: 36