QuMei's Takeover Bid for Ekornes (B): Transaction Arrangements

Sheng Huang, Chi Zhang, Yuan Meng

Research output: Other contributionCase Studies

Abstract

"This case series was developed around QuMei’s takeover bid for Ekornes ASA, a company headquartered in Norway. QuMei, the Chinese furnishings manufacturer established in 1993 and listed on Shanghai Stock Exchange in 2015, was the promoter of the takeover bid. In the same year, it introduced its "New QuMei" strategy, pivoting from a pure furnishings supplier to a content and service supplier in the furnishings industry. The target company, Ekornes, was a prime Norwegian furnishings manufacturer with four affiliate brands, including "Stressless", known as the "most comfortable chair in the world". It also had vast market bases in Europe and America. Case A mainly discusses the reasons behind QuMei’s takeover of Ekornes. First, it explores why QuMei opted for acquisition rather than organic growth. Second, having decided to take the acquisition route, how did it choose Ekornes as its target. Finally, the case examines the feasibility of the takeover and potential ensuing risks. Based on case discussions, students are given the chance to analyze the logic behind takeovers, how target companies are selected, how takeovers take different forms depending on purpose, and how to analyze and avoid potential risks that may be involved. Case (B) focuses on the transaction arrangements in QuMei's takeover of Ekornes: was Ekornes suitably valued? How would QuMei reach a consensus with the target company's shareholders regarding the reasonable consideration for takeover? Then, after valuation, how should the transaction be funded and structured? By the end of 2017, QuMei's assets were at ¥2.1 billion, while its overseas sales were a mere ¥4.87 million. In contrast, Ekornes's assets were valued at over ¥4 billion. This case therefore can be reference for practical problem-solving in acquisition of snake swallowing elephant. More than two years after the takeover, its impact on QuMei and Ekornes has begun to be borne out on the balance sheets. However, the long-term implications on risk and revenue still remain to be seen and students are encouraged to develop their own course of reasoning.
Original languageEnglish
Number of pages9
Publication statusPublished - 31 May 2022

Case number

FIN-22-931

Case normative number

FIN-22-931-CE

Case type

Field Case

Update date

07/03/2023

Supplement

For more details, please visit www.chinacases.org

Published by

China Europe International Business School

Keywords

  • Valuation
  • tender offer
  • Financing
  • Merger strategy
  • M&A strategy
  • drivers of M&A
  • motivation of M&A
  • M&A motivation

Case studies discipline

  • Finance
  • Strategy

Case studies industry

  • Manufacturing

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