Pan Europa

Question 1: Shareholders, especially Venus Asset Management that holds 12 percent of shares, are unpleasant with the situation. Senior Managing Director treats board members with a hostile takeover in a situation that shareholders’ doubt about the company. Since the company’s common stocks prices are below the industrial average and the business fiasco which was implementing a new product line to increase the market share, the company’s profitability declined. In this situation, raising capital is not easy. Share prices are too low to sell equity and; marginal cost of equity and debt ratios are too high to borrow more money from creditors.

EXHIBIT 2 shows that profit margin is too low. Besides, liabilities are increasing and this effect net income because of increasing interest expense. Although cutting off dividends can reduce shareholders’ confidence, it is needed where the company is using really high leverage ratio and need cash to cover its debts. In conclusion of the 3 years, net income and earnings per share declined by about 27.5% whereas gross sales only slightly reduced. Total assets and shareholders’ equity increased about 33%.

After price wars, some companies bankrupt and others have the opportunity for growth. In this situation, Pan Europa Foods is one of the winners of the price war and now it is their turn to investment.

In this situation, Ponti, Morin and Humbolt should lead the way for Pan-Europa. These three managers have acceptable projects for the firm. Ponti can take advantages from opportunities and can be helpful for positioning during growth phase. Morin is good at gaining market share and he is needed for the success of potential projects which are open for growth. Lastly, Humbolt is skeptical and this characteristic is essential for Pan-Europa where they have high leverage and even a light shock can lead bankruptcy.

Also finance director Trudi Lauf should lead the way for Pan-Europa. He has to reduce the huge debt of the group...