Michelle Weaver
Saint Leo University
Dr. Kouassi Koucoa
GBA 398: DL01 Integrated Perspectives on Business
March 19, 2018
This is a case study about two companies trying to improve their profitability. Rawhide was a brewery company based out of Ontario, Canada. In 2011 Rawhide had annual sales of $5.3 million, but in 2009 the company doubled its capacity in operations. Because of this, the company’s operating capacity fell way below normal which caused them to take out a 10-year bank term loan. The chief executive officer (CEO), Andrew Upson was worried that the under-utilization of the capacity would ruin the company in the long run. Rawhide had incurred a heavy debt which caused the company’s debt-to-equity ratio to be way above normal. Upson decided to make a proposal to its competitor Tabby Cat Beer.
Tabby Cat Brewery was a micro-brewery that had record breaking sales in 2011. Their sales overreached $2 million since opening for business in 2008. Tabby Cat was experiencing problems of its own. The chief executive operator (CE0), Bruce McAlpine was worried about the rapid growth of the company impacting the manufacturing operations. The current facility of the brewery was not large enough to keep up with the growth of the company. McAlpine was faced with the problem of …show more content…
Newco would process beer for both companies. The advantage of Proposal 2 is that both companies would pay the same price per case of beer. The price per case would be 15 % lower than what was proposed in Proposal 1. Rawhide would be responsible for making sure the 10-year loan would be repaid. Since Rawhide is the guarantor of the loan, they would be accountable for any loss from taking on the new company. Rawhide and Tabby would enter into a shareholder agreement giving Rawhide complete control over any decision