Dixon

Meier, 1

Dixon Corporation: The Collinsville Plant (Abridged) Case Analysis Prepared by Renee Meier, Cohort B November 12, 2010

Prepared For Brett Hunkins MBA 634: Measurement II Richard DeVos Graduate School of Management

Meier, 2 Dixon Case Analysis

Introduction

Dixon Corporation, a specialty chemical company is considering the purchase of a sodium chlorate plant in Collinsville, Alabama. This opportunity will allow Dixon to expand its market and product line. Because of the location of the plant and its’ current market share, the Collinsville plant seems to be a good fit with the current business already established at Dixon. Dixon has a successful track record in the specialty chemical business and is evaluating the impact of the purchase. A case analysis is provided to understand the financial implications and to determine under what conditions the purchase should be made if made at all.

The Collinsville plant is being sold by American Chemical Company as a condition of their purchase of Universal Paper. They are eager to sell. The asking price is $12 million and they are offering new laminate technology for an additional $2.25 million. The technology has not been fully implemented and is expected to roll out in late 1980, almost a year after the original purchase. American Chemical has pledged product information and technical support throughout the year with full support upon roll out. The case is prepared with two scenarios: Purchase of the Collinsville plant without the laminate technology, and Purchase the Collinsville with the laminate technology.

According to the case, the global sodium chlorate demand has not been met for more than 10 years (Exhibit3). Collinsville plant production has been under their 40,000 ton capacity. A review of Exhibit 4 shows the American Chemical Company as the third largest producer of sodium chlorate. If their purchase of Universal Paper Corporation is successful, they will change their market position...