C plc, a chemical manufacturing company, has until recently achieved a steady increase in profitability over several
Question:
C plc, a chemical manufacturing company, has until recently achieved a steady increase in profitability over several years. It faces stiff competition, and the directors are concerned about the disquiet expressed by major shareholders regarding performance over the last two years. During this period, it has consistently increase dividends, but its share price has not grown at the same rate as it did previously.
K plc, a direct competitor, is similarly experiencing a reduction in profitability. Its shareholders are diverse, with the majority being financial institutions. K plc has been criticised for under-investment and has achieved no product development over th last two years. Following a concerted media campaign, K plc is facing prosecution for discharging increased pollutants into a rived.
C plc is seriously considering making a bid to acquire K plc. The directors of C Plc however, are divided as to whether K plc should be closed down or permitted to continue production post-acquisition if a bid is made. In either situation, significant staff redundancies would follow.
- Evaluate the strategic factors which C plc would need to consider before making a bid to acquire K plc.
(20 marks)
Discuss the environmental issues that would face the directors of C plc if it proceeds with the acquisition of K plc.