CASE: PLACEMENT ISSUE AND FINANCIAL INSTRUMENTS – The Pollon (22)

The Garcia family is the majority shareholder of the poultry company “Pollon” (Latam leader in the production and marketing of farm animals and balanced food for livestock); controlling that company with a 55% of the subscribed and paid capital. The Capital of the company is currently S /. 500 million and net income last year was S /. 80 million.

On the other hand the García family controls the agricultural company “Corn Dorado” with a 99.9% stake. Unlike “The Pollón” which is a company whose shares are traded on the stock exchange, the latter is a SAC. The capital of this company is currently S /. 100 million and its net profit was S /. 28 million. The production of “Golden Corn” is almost 100% destined to be sold to the company “Pollon”.

“The Pollón” reprofiling is evaluating its financial structure which has hired an important structuring company. Thus, its consultants have raised shareholders ‘Pollon’ make a share issue that would allow them to buy the company “Corn Dorado” and vertically integrate the business, with consequent advantages in economies of scale and better margins. So, they have estimated that the market value of agricultural, according to estimates CF, would be S /. 140 million, while Utility Pollon could happen to S /. 110 million a year.

Under the assumption that the ratio of distributing cash dividends is 100% (consider that dividends will remain constant over time), which you think should be the decision taken by the shareholders on the day of the AGM (AGM considers ) (the proposal is that the same shareholding structure that already has the company at present is maintained).

Consider in its assessment that the opportunity cost of the Garcia family is 15% and that capital constraints, to accept the purchase of new shares to be issued, the resources come from the same amount it would receive from the sale of the company ” Corn Dorado “.

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