Case 6: Clestra Corporation. Clestra Corporation is a manufacturer of consumer p

Question

Case 6: Clestra Corporation.

Clestra Corporation is a manufacturer of consumer products ranging from canned and packaged foods like spaghetti sauce and popcorn to over-the-counter health aids like toothpaste and mouthwash. Its annual worldwide revenues are just under $6 billion. Clestra brands are not among the top two in the industry in any of its product lines, each brand ranking from fourth to sixth in annual sales in countries in which it markets its products. Clestra's CEO has been discussing the company's future with its consultant, KRNP Consulting LLP. KRNP has suggested that Clestra consider acquiring Ballmax, Inc., a consumer products company with two billion dollars annual sales. Ballmax's brands are complementary to Clestra's brands, and while smaller than Clestra, Ballmax has a distribution system that will give Clestra access to markets in which Clestra is not currently a significant seller. Clestra's CEO also wants to improve consumer recognition of the Clestra brand. She suggests that Clestra acquire naming rights to a stadium being built for a baseball team in northern Virginia, the Virginia Hatchets. The CEO thinks that Clestra has the inside track to acquire naming rights because the family of one of Clestra's board members owns the baseball team that will own and operate the stadium. In investigating these two opportunities, the CEO discovers that Clestra may be a target for a takeover by one of the larger consumer goods companies.

TRUE OR FALSE WITH EXPLANATION

1. The directors’ decision to acquire Ballmax, Inc. is protected by the business judgment rule if the directors made an informed decision in approving the acquisition and do not have a conflict of interest, even if the decision turns out to be disastrous.

2. The board of directors must make a thorough and independent evaluation of the recommendation of KRNP to acquire Ballmax, Inc. in order to be protected by the business judgment rule.

3. Clestra Corporation can proceed with the plan to acquire naming rights to the stadium being built for the Virginia Hatchets, even though one of its directors owns the baseball team that will own and operated the stadium.

4. KRNP owes fiduciary duties to Clestra Corporation in advising it how to proceed with the Ballmax, Inc. acquisition.

5. The board of directors of Clestra Incorporated should adopt anti-takeover measures - such as transferring shares or core assets to a white knight, installing a stock trading surveillance program, and approving a poison pill - to prevent a hostile takeover of Clestra Incorporated.

1. The directors’ decision to acquire Ballmax, Inc. is protected by the business judgment rule if the directors made an informed decision in approving the acquisition and do not have a conflict of interest, even if the decision turns out to be disastrous.

2. The board of directors must make a thorough and independent evaluation of the recommendation of KRNP to acquire Ballmax, Inc. in order to be protected by the business judgment rule.

3. Clestra Corporation can proceed with the plan to acquire naming rights to the stadium being built for the Virginia Hatchets, even though one of its directors owns the baseball team that will own and operated the stadium.

4. KRNP owes fiduciary duties to Clestra Corporation in advising it how to proceed with the Ballmax, Inc. acquisition.

5. The board of directors of Clestra Incorporated should adopt anti-takeover measures - such as transferring shares or core assets to a white knight, installing a stock trading surveillance program, and approving a poison pill - to prevent a hostile takeover of Clestra Incorporated.

Explanation / Answer

I will be happy to assist you with any further questions that you might have. For any help regarding the answer, pls write in the comments section and I will get back to it as soon as possible. Please give a positive rating if the answer helped you.

1.“True”, The directors’ decision to acquire Ballmax, Inc. is protected by the business judgment rule if the directors made an informed decision in approving the acquisition and do not have a conflict of interest, even if the decision turns out to be disastrous as the business judgement rule suggests the directors or the higher authority of the organisation to inform the primary shareholders of the company.

2. “True”, The board of directors must make a thorough and independent evaluation of the recommendation of KRNP to acquire Ballmax, Inc. in order to be protected by the business judgment rule as according to the business judgement rule an organisation or the higher authorities must scan the best alternatives available and make some changes if necessary in order to reach the organisational goal in a specified period of time.

3. "True", Clestra Corporation can proceed with the plan to acquire naming rights to the stadium being built for the Virginia Hatchets, even though one of its directors owns the baseball team that will own and operated the stadium. As it will be the best mode of promoting the organisation which will eventually help the company to maximize their share in the market although one of the company's director owns a team. As an organisation is treated as a "Separate Legal Entity".

4. "True", KRNP owes fiduciary duties to Clestra Corporation in advising it how to proceed with the Ballmax, Inc. acquisition. As KRNP acts as the Cestra corporations consulting agency and is hired by the Clestra corporations to get effective business advises in order to ensure the healthy functioning of the business.

5. "True", The board of directors of Clestra Incorporated should adopt anti-takeover measures - such as transferring shares or core assets to a white knight, installing a stock trading surveillance program, and approving a poison pill - to prevent a hostile takeover of Clestra Incorporated. As the company needs to take these preventive measures in order to continue their business operations and to protect their share in the market while maintaining the company's identity

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.