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Lester Electronics, Inc. (LEI), Shang-wa Electronics, Transnational Electronics Corporation (TEC), and Avral Electronics, S.A. are firms that are involved with growing through mergers and acquisitions and each firm desires to maximize shareholders wealth. In 1978, Shang-wa Electronics, a small Korean manufacturer of capacitors, formed a partnership with Bernard Lester who then founded LEI. LEI entered into an exclusive United States distribution contract with Shang-wa. LEI grew rapidly into a consumer and industrial electronics parts master distributor. Lester has not marketed domestic-made parts outside of the United States and LEI's revenues approximate $500 million a year. Also, LEI is rated Baa by a nationally recognized rating agency.
Situation Background (Step 1)
Lester Electronics (LEI) is at a cross roads in its development. It has been presented with an opportunity to acquire Shang-wa, a Korean supplier with which it has a long standing agreement for the exclusive distribution rights to the USA. Alternatively a proposal has been presented for LEI to joint venture with Shang-wa to establish another manufacturing facility in a country neighboring Korea. However, one of LEI's very large competitors has already offered to acquire Shang-wa. That would put LEI in jeopardy of losing a product line which accounts for 43% of the current revenues. This new information comes to LEI less than a month since LEI's Board of Directors approved a major capital expenditure in the amount of $50 million to establish two distribution facilities in Europe. In the midst of this LEI has become an acquisition target of another of their very large competitors.
Issue Identification (Nadine)
The issues are ...