Continental Carriers Inc.

CONTINENTAL CARRIERS INC.

Company Recommendations

The recommendation for Enterprise International Carriers, Inc. about buying Midland Freights, Inc. evaluated in US $ 50,000,000 is as follows:  Perform the financing of this project with a debt instrument, acquiring the 15-year bond with an annual interest of 10%, this is explained by the following reasons.

• The cost of financing through this instrument is substantially less than make an offer of preferred shares and common shares also market. It must be said that due to the economic situation that is happening in the local context rates are quite attractive and is a good time to incur debt.

• Debt instruments generate interesting business for savings in tax payments. The degree of leverage also increases the EBIT of the company that makes it more attractive compared to industry competitors.

• In making this choice the company increase its leverage, which is favorable to increase its ROE and thus positively stimulate the share price. Debido a la desregularizacion de la industria y a la disminucion en las barreras de entradas, el precio de la accion no ha tenido un sustento atractivo y esta opcion busca darle mayor atractivo a la accion de la empresa.

• In the case it explained that the company has an aggressive attitude to doing business and looking for opportunities, but this goes hand in hand with financiamieno structure. Increase long-term debt if possible for Continental Carriers, Inc. because its corporate culture acts that way and is a way to show more consistency with his management style.

Case Context

May 1988 Elizabeth Trop, treasurer of the company Continental Carriers Inc (CCI) is considering the advantages and disadvantages of the methods of financing for the acquisition of the company Midland Freight Inc.  

After a heated debate at the last meeting of the board of the company where different directors presented the pros and cons of different methods it failed to reach a consensus which will be how to finance the US $ 50,000,000 in effective for purchase and continue with the plan expancion company, looking for loose reappoint result of the action of the company in the last period.  

The tight deadline for the proposed acquisition for the day make real urgency and importance iminente the need for a detailed analysis of funding acertivo which the treasurer has to evaluate the stage and make a firm decision.

Continental Carriers, Inc. History

Continental Carriers Inc, was created in 1952 by the effort of three brothers,
originally from the city of Chicago US. It is inserted into the category of general cargo carrier regulated routes from the Pacific coast of Oregon and California to the Midwest points reaching several locations in the State of Texas where he had no more tracendencia until mid-1970.  

Then, by the current president Mr. Evans joins the company for efforts to expand the company and position within the largest of the area initially focused on intensifying the marketing of the company putting a strong emphasis on improvisation their services.

By 1982, the company with the opening of the company and the initial public offering society a program designed to reduce costs through the combination of computerized operations and improvement in terminal facilities.

Continental Carriers, Inc. Expansion Plan

In 1988, the continuous improvement led the company to successfully position itself in the industry, but this was not enough. The board of directors came to the conclusion that the key to increasing profits and revenue was to expand the company through a selective acquisition policy toward competition.