Case 11-3
Case 11-3
Master of the Universe
TABLE OF CONTENTS
Statement of facts……………………………………………... 3 Question 1…………………………………………………….. 5 Solution……………………………………………….. 5 Question 2…………………………………….......................... 6 Solution……………………………………………….. 6 Question 3…………………………………………………….. 7 Alternatives…………………………………………… 7 Solution……………………………………………….. 8
STATEMENT OF FACTS Saturn and Venus, form Jupiter, a joint venture. Saturn owns 51 percent of Jupiter and Venus owns 49 percent of Jupiter. The purpose of Jupiter is to own and operate organic clothing design and manufacturing facilities and sell organic clothing to unrelated retailers. When Jupiter was formed, Saturn contributed $561 million to Jupiter and Venus contributed four manufacturing facilities with an assembled workforce, with a total fair value of $539 million to Jupiter. Venus was looking to exit its clothing manufacturing business, as this business no longer was a strategic fit for Venus. However, Saturn was looking to expand its footprint in the manufacturing of children’s clothing. In exchange for their contributions, Saturn and
Venus received a combination of equity and debt securities for Jupiter. The Articles of Incorporation of Jupiter state the following in terms of governance and management of Jupiter:
• The Board of Jupiter (the “Board”) comprises eight individuals, four each from
Saturn and Venus.
• Both Saturn and Venus are able to nominate individuals for the position of CEO of Jupiter (the “CEO”).
• The CEO is responsible for the day-to-day operations of Jupiter.
• Most Board actions are passed by a simple majority vote; however, the following actions cannot be taken without unanimous approval of the Board: appointment and removal of the CEO, decision to make calls for capital contributions, admission of new joint venture
Master of the Universe
TABLE OF CONTENTS
Statement of facts……………………………………………... 3 Question 1…………………………………………………….. 5 Solution……………………………………………….. 5 Question 2…………………………………….......................... 6 Solution……………………………………………….. 6 Question 3…………………………………………………….. 7 Alternatives…………………………………………… 7 Solution……………………………………………….. 8
STATEMENT OF FACTS Saturn and Venus, form Jupiter, a joint venture. Saturn owns 51 percent of Jupiter and Venus owns 49 percent of Jupiter. The purpose of Jupiter is to own and operate organic clothing design and manufacturing facilities and sell organic clothing to unrelated retailers. When Jupiter was formed, Saturn contributed $561 million to Jupiter and Venus contributed four manufacturing facilities with an assembled workforce, with a total fair value of $539 million to Jupiter. Venus was looking to exit its clothing manufacturing business, as this business no longer was a strategic fit for Venus. However, Saturn was looking to expand its footprint in the manufacturing of children’s clothing. In exchange for their contributions, Saturn and
Venus received a combination of equity and debt securities for Jupiter. The Articles of Incorporation of Jupiter state the following in terms of governance and management of Jupiter:
• The Board of Jupiter (the “Board”) comprises eight individuals, four each from
Saturn and Venus.
• Both Saturn and Venus are able to nominate individuals for the position of CEO of Jupiter (the “CEO”).
• The CEO is responsible for the day-to-day operations of Jupiter.
• Most Board actions are passed by a simple majority vote; however, the following actions cannot be taken without unanimous approval of the Board: appointment and removal of the CEO, decision to make calls for capital contributions, admission of new joint venture