ACCG308 Corporate Accounting and Reporting
 
2012 Semester 1
 
ASSIGNMENT
 
Due: Friday 18 May 2012 at 5pm.
 
Submission instructions:
 
1. You must upload the assignment to i-learn. Paper copies are not accepted. Do not submit to your tutor.
 
a. You must upload this whole file template of cover page/ questions/answers as one single Word document.
 
b. You must type your name and student number on this first page.
 
c. Also write your details in the file name itself:
 
Assignment on takeovers, family name, first name, ID number
 
d. Do not alter the template or add anything to the file other than by typing in the answers in the specified spaces.
 
e. Do not upload more than one file.
 
f. Failure to follow these upload instructions means a serious penalty of 20% of marks awardable.
 
2. Assessment percentage: 14% (out of 100% total for the unit).#p#分頁標題#e#
 
3. Late assignments will incur a penalty of 20% of the awardable marks per day late (handing up a medical certificate does not avoid this penalty).
 
 
STUDENT NAME:
 
 
STUDENT NUMBER:
 
Please read the instructions on the next page carefully. Partly this is an exercise in being able to follow instructions (as you will have to do when you get an executive job). If you do not read the instructions carefully you are liable to lose a serious amount of marks.
 
CASE STUDY ON CORPORATE TAKEOVER
 
Consult the internet, newspapers, business magazines and company reports (usually available on-line) to discover information about an Australian corporate takeover that happened between 1 July 2009 and 31 December 2011. The takeover should be one that:
 
· involved a takeover offer (on-market or off-market).
 
· resulted in the target company becoming a member of a corporate group.
 
You must also be able to obtain at least one consolidated report for the resulting group in a period after the takeover has happened.
 
REQUIRED: Answer the set questions about your chosen corporate takeover and type in your responses in the spaces provided.
 
· This is an individual assignment. Group collaboration is not allowed.
 
· This questions you will answer are not ‘general’ or theory questions but they relate to the practical specifics of two chosen companies in the real world.
 
· Stay within word limits. A penalty applies.
 
· This is a research paper. You must re-write material in your own words and not just copy and paste from the internet. You must properly reference all material.
 
· It is extremely important that you are familiar with the university policy on plagiarism that is included in the unit outline.
 
· See the referencing guide in separate document posted on i-learn. Use Harvard references in the answer boxes and ALSO cite bibliography where shown at end of the file.
 
· The assignment will be scanned using Turnitin software and if you have copied material from the internet or other sources improperly you will be penalised for that section.
 
· The scanning will also tell us if you have copied from another student. If there is student-to-student copying both students will receive zero marks for the whole assignment and may be reported to authorities for misconduct.
 
· The Jubb text gives a reasonably thorough introduction to takeover rules (lecture notes are too basic for this). However you must read more widely than the set textbook and include many other references. You cannot expect to receive a high mark unless you include evidence of wide research.
 
· Note that takeovers before 1 July 2009 are not permitted for inclusion and would result in zero marks for the assignment.
 

 
Your assignment will be marked taking into account:
 
· Your resourcefulness and apparent degree of self-motivation in finding out the material.
 
· Your ability to understand and describe the issues and provide explanations on each of the questions.
 
· Your resourcefulness in trying to understand the Australian company environment.
 
· Writing skills –This mark covers the following generic skills 1) layout, 2) clear meaning, 3) structure and organisation, and 4) grammar, spelling and punctuation.
 
Do not paste-in copies from company reports etc. Just answer the set questions in the template. Do not add anything else to the document. You should get to the point and avoiding wordy repetitions (ie. be succinct and clear).
 
The assignment will be marked by a tutor but may not be your regular tutor.
 
Feedback and mark will be provided after week 13.
 
Type answers in boxes supplied (only). Stay within word limits.
 
QUESTION 1
 
1 Names of the two companies involved in the takeover (acquiring company and target company)? When did the takeover happen?
 
2 Describe the operations of both companies just before the takeover. Are operations of the two companies similar, compatible, complementary, different, or what are they? Explain in detail.
 
MAXIMUM 170 WORDS. MAXIMUM 12 MARKS.
 
WARNING: If you just copy and paste an entire section from an annual report without change you get zero marks for that. All questions in the assignment are a research exercise. You do research, analyse, re-write in your own words, make relevant to the specific question, give Harvard references to sources. See the referencing guide. This is the last time we will give this warning. You have been warned.
 
l The bidder is PRG company , the target is KLM. This happened at 29th October at year of 2009.
 
l The PRG founded by Norman Miles in 1951, the main employees and maintenance and project services. The company's operations are focused in five parts, Property services, equipment management, personnel management, fleet management, and mechanical management. The company's strategy is to become the market's largest suppliers.
 
l KLM is one of Australia's largest communications company, education, defense, medical, communications, industry, mining industry, to provide design, installation and maintenance services of communications equipment.
 
l According to the financial crisis, this two company both face the problem with bankruptcy ,this takeover more like complementary , PRG company, which is a good time of the merger, because a lot of the good performance of the company may now be operating difficulties because of the lack of liquidity.
 
QUESTION 2
 
1 What was the reason for the takeover involving the two companies you chose to study?
 
2 What did the acquiring company hope to achieve? How would the takeover benefit the acquiring company?#p#分頁標題#e#
 
Maximum 170 words. Maximum 12 marks.
 
l I choice this two company because they are easy to find the information about this takeover,it’s a classic takeover .
 
l There are three reason for PRG to takeover KLM. Firstly, the internal reasons: KLM is one of the largest providers of communications services for electricity on the Australian market to provide quality services. PRG company not only can use KLM's assets to increase its range of services and quality, also ,they can use KLM customers is an advantage to the acquisition of PRG. Second, the strategic relationship: This acquisition will increase or decrease in the PRG scope of services and to extend the depreciation period of fixed assets, in line with the original strategy which is to maintain a strong market position. Third, the external causes: the PRG in business services, as well as supply of raw materials to provide services, both of which receive serious economic crisis in the past two years,this takeover is in order to ensure a stable income in the future.
 
QUESTION 3
 
1 What was the capital structure of the two companies you chose to study (types of shares, number of shares) just before the takeover?
 
2 What did the acquirer offer the target company shareholders? Explain why the acquirer structured the takeover offer in this way.
 
Maximum 170 words. Maximum 12 marks.
 
l PRG and KLM financial reports, the average growth rate of the PRG is 50%, while KLM is 20%, no synergistic effect of revenue growth is 46.5%. Because revenue growth synergies discussed above, can be reasonably expected operating income growth rate will rise to the entire 49%. In addition, the PRG on the operating expenses / sales ratio is 87%, KLM is 97%, and this ratio will reach 88% .
 
l The net value created by the shareholders of the bidder to be counted as the target value minus the actual value paid to the bidder. KLM (Koller, et al (2005)), we estimate the intrinsic value of $ 25.6 million Australian dollars, and the synergies valuation is $ 14,300,000. Therefore, the total value of the KLM is $ 39,900,000. However, the PRG to KLM's bid was $ 28,140,000, $ 11,760,000 AUD gap between the PRG received the price and the price actually paid.Therefore, according to our analysis, the PRG does for its shareholders in this transaction to create value.
 
QUESTION 4
 
1. How did the market react to the takeover announcement? Was this perceived to be beneficial to target company shareholders?
 
2. How did the share prices of each company react during the takeover period? What were the reasons for these reactions?
 
Maximum 170 words. Maximum 12 marks.
 
l from the information gathered prior to the announcement, the stock price of the PRG in the range of fluctuation of $ 4.50 to $ 4.30.Demanded an end to two days, the stock price rose $ 4.55, in calling for an end, however, the stock quickly fell $ 0.48, fell to $ 4.07 on November 2, 2009. Share price continued to fall.#p#分頁標題#e#
 
l The reason are following, First ,the business combination itself, the announcement date, the PRG also announced that 18,388,935 common shares to raise the funds to the merger of KLM and future merge. (Reuters (2010)) increase in the number of shares issued will reduce the price per share of stock.
 
QUESTION 5
 
1 How many and what kind of shares were needed to obtain control of the target company you chose to study? How many shares were obtained?
 
2 Explain how the board changed as a result of takeover activity.
 
Maximum 170 words. Maximum 12 marks.
 
l October 29, 2009, the PRG announced that the company has agreed to acquire the agreement on the KLM. Under the agreement, the PRG agreed to pay $ 28.1 million to purchase all the shares of the company to KLM.
 
l The hands of each share of a KLM shareholders can receive A $ 0.47. The two PRG signed a purchase agreement. December 12, 2009, the PRG accounted for 50.93% of the shares of the new company. But on December 6, 2009, the figure is 70.38%. January 19, 2010, PRG acquired a 92.31% stake in the KLM. Throughout the acquisition process at the end of January 20, 2010, the PRG companies control 96.31% of the shares.
 
QUESTION 6
 
1 What was the effect on the takeover on the target company?
 
2 Did directors and executive officers lose their jobs? What about other employees?
 
Maximum 170 words. Maximum 12 marks.
 
l According to the KLM Company Profile, various projects were undertaken, but KLM in the next few years to continue with new projects, so assume that after five years of rapid development, KLM tends to be more mature, after which the growth rate will be about less than the goods is equal to Australian average nominal gross domestic product.
 
l KLM's shareholders' meeting has recommended that all shareholders in the company to accept the takeover offer. Anonymous The company's general manager, Greg and Peter Jinks holds the stock of the company, nearly 20%.The two signed a purchase agreement with PRG There is no specific information about the other employees ,but I think they will find a new position in the bidder company or an other company to work.
 
QUESTION 7
 
1 Detail the goodwill or bargain on acquisition arising in your chosen company study.
 
2 If goodwill resulted has any been impaired since the acquisition date?
 
3 Do you think the takeover was a good deal or a bad deal for the acquirer? Give reasons.
 
Maximum 220 words. Maximum 14 marks.
 
l It should be the good will on acquisition arising in my chosen company. The net value created by the shareholders of the bidder to be counted as the target value minus the actual value paid to the bidder. KLM (Koller, et al (2005)), we estimate the intrinsic value of $ 25.6 million Australian dollars, and the synergies valuation is $ 14,300,000. Therefore, the total value of the KLM is $ 39,900,000. However, the PRG to KLM's bid was $ 28,140,000, $ 11,760,000 AUD gap between the PRG received the price and the price actually paid.Therefore, according to our analysis, the PRG does for its shareholders in this transaction to create value.#p#分頁標題#e#
 
l There is no significant impaired since the acquisition date.
 
l I think it is a good takeover between this two company,because ccording to our analysis, the KLM company's value is $ 25.6 million. PRG has paid a total of $ 28.14 million to acquire the company, the excess part of a synergy. Therefore, to examine PRG really its shareholders to create value, it is necessary to examine the realization of synergies.
 
QUESTION 8
 
1 What implications were there for the takeover you studied as regards the Australian economy?
 
2 Will the takeover improve or reduce competition do you think? References to financial journalist/economics commentator articles would be useful here.
 
Maximum 220 words. Maximum 14 marks.
 
l This takeover is a successful case for PRG company, Mergers and acquisitions are important for the efficient functioning of the economy. They allow firms to achieve efficiencies, such as economies of scale or scope, and diversify risk across a range of activities. They also provide a mechanism to replace the managers of underperforming firms
 
l In my opinion, most of the takeover will improve the competition of the bidder company, it Can expand the production scale and reduce costs, form an effective economies of scale. Second to obtain adequate cheek production of raw materials and labor, and enhance their competitiveness. Third, to increase market share, enhance the industry strategic position. Fourth, the implementation of brand management strategy, to increase their visibility.Also, the takeover is risky in some condition, Financing risks, if it is improper to raise funds, it will adversely affect the company's capital structure and financial leverage to increase their financial risk. Second, the assessment is not the real risks faced after the merger to overestimate the value of the company .Third, the anti-takeover risks. Fourth, operational risk and placement of the acquired company employees risk. These risks need to be considered and the development of effective acquisition plan.
 
END OF QUESTIONS
 
List of references
 
Type under here in the following manner (delete the examples first).
 
1."KLM Plane Facts". KLM. Retrieved 6 December 2010. http://www.klm.com/corporate/en/index.html
 
2."Lost Aeroplane. Unavailing Search For Dutch Machine" The Times (London). Saturday, 26 April 1923. Issue 43636, col F, p. 10.
 
3. "KLM accused of helping Nazis flee". BBC News. 8 May 2007 ,http://news.bbc.co.uk/2/hi/europe/6635677.stm
 
4. Corporate.klm.com "KLM AirCares" KLM Website. Retrieved 21 September 2010.
 
5.Pikula, Sam (Major), The ArmaLite AR-10, Regnum Publications (1998), p. 73
 
6.^ "Uiver verbrand, inzittenden gedood". De Telegraaf 42 (15920): p. 1. 21 December 1934
 
7.ASX Release,Thursday 7 april 2011,inverstor presentation ,
 
http://www.programmed.com.au/group/images/PDF/asx%20notice%20investor%20presentation%207apr11.pdf#p#分頁標題#e#
 
8. Bebchuk, Lucian A., and Oliver Hart, 2002, “Takeover Bids vs. Proxy Fights in Contests for Corporate Control,” NBER Working Paper No. 8633.
 
9. Borokhovich, Kenneth, Kelly Brunarski, and Robert Parrino, 1997, “CEO Contracting and Antitakeover Amendments,“ Journal of Finance, 52, 1495-1517.
 
10. Johnson, Mark S., and Ramesh P. Rao, 1997, “The Impact of Antitakeover Amendments on Corporate Financial Performance,” Financial Review, 32, 659–690.
 
11. Australian Competition and Consumer Commission, Merger Guidelines, November
 
2008, para 1.1.
 
12. See, for example, MC Jensen, ‘Takeovers: Their Causes and Consequences’ (1988)
 
2 Journal of Economic Perspectives 21.