Atlantic Corp. Harvard Case Solution & Analysis

Atlantic Corporation – Abridged

The report presents a case where the nation’s largest paper firm, named Atlantic Corporation (AC) is looking forward to acquire linerboard mill and other plants from Royal Paper Corporation (RPC). The acquirer (AC) needs to examine all the strategic and financial aspects of this purchase to accomplish its strategic goal. The report carries a detailed analysis of all the aspects related to this acquisition transaction.

Problem Statement

The report discusses the strategic, operation and financial aspects of the acquisition. The major areas discussed include:

  • Royal’s linerboard mill – a sound strategic move
  • Outlook for linerboard prices
  • Atlantic and Royal’s combined approach
  • Offer price to acquire linerboard and box mill operations
  • Royal’s linerboard mill and plants acquisition
  • Means of funding

Royal’s linerboard mill – a sound strategic move

The Atlantic Corporation is the major paper producer and largest buyer of linerboard. Such acquisition will enable the AC to enjoy horizontal integration and to increase its linerboard capacity. The demand for linerboard is particularly very high and the unavailability of new linerboard plant in the industry causes the AC to face a shortage of material in the market and relatively at a higher price, so such strategic move will enhance the existing production capacity of the Atlantic Corporation and to avoid any adverse effect of increased linerboard prices. The linerboard prices are expected to increase from $270 in 1983 to $360 in 1985; if the AC succeeds to acquire the linerboard plant then it would be able to enhance its own profitability by reducing the cost of goods.

There is an estimation of 100% consumption of linerboard in future years, which may cause difficulty for the  AC to purchase raw material and relatively at higher prices, so such strategic move will benefit them to avoid any future adverse effect on profit.

Outlook for linerboard prices

Linerboard is transformed into cardboard boxes, which are used to pack shipped goods. So the demand of linerboard will depend on the goods exported from the country.  The industry is economic sensitive; an upward cycle will boost the demand for linerboard. The analysis in the Exhibit 2 shows that that the production and consumption capacity has been increased from 13,494 to 14,900 and 11,707 to 12,775 respectively. Further increase in production and consumption is also estimated in future years and the sale is nearly expected to rise by................

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Two forest products manufacturers in talks to sell a group of assets. ACRS allow the buyer to quickly depreciate stepped on to justify the high praise. The seller recently paid blackmail, and the deal could be related to his desire to avoid a second investor redemption. "Hide
by Peter Tufano Source: Harvard Business School 15 pages. Publication Date: July 18, 1985. Prod. #: 286004-PDF-ENG

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