Sinpura a listed company in Singapore, is a food retailer that operates in various segments, one of
Question:
Sinpura a listed company in Singapore, is a food retailer that operates in various segments, one of which is dairy. Sinpura has been very profitable over the years, paying a substantial amount in taxes. Sinpura has high levels of free cash flows and is considering the acquisition of Dimento. Dimento is a private company in Malaysia that is well known for its high quality, luxury chocolates. Dimento products are particularly popular in Singapore's tourist areas. Dimento has been making losses over the past three years. If the acquisition is successful, Sinpura estimates that it could market Dimento's products more efficiently and reduce its annual operating costs by 25%. These cost savings could be achieved by eliminating duplicated administrative functions, reduction in warehousing costs, automating some functions and thereby reducing labour costs. All excess warehousing capacity would be rented out or sold. Although Sinpura operates in many countries in Asia, the brand is not well known in Malaysia. Sinpura proposes to pay for the acquisition using either cash or shares.
Required:
a. Identify and discuss the synergies if any, in that Sinpura could exploit by acquiring Dimento. (10 marks)
b. Distinguish between the two forms of payment available to Sinpura for the acquisition and advise which option would be more beneficial. (10 marks)
c. Cross-border acquisitions can sometime fail. Identify and critically discuss the reasons that could lead to the failure of the acquisition of Dimento by Sinpura. (10 marks)