Page 10 - CIMA SCS Workbook August 2018 - Day 2 Tasks

CIMA AUGUST 2018 – STRATEGIC CASE STUDY

Reference Materials - email to Den Rice from Alan Finch

Email

To: Den Rice, CFO
From: Alan Finch, Chairman
Subject: DST Group

I have been contacted this morning by Jack Kenny, the Chairman at DST Group. As I am sure you
know, DST publishes 28 newspaper titles throughout Borland.

Jack was frank in his discussion with me; if he cannot find a buyer for DST, it is likely that the
company will go bust in the next 12 months. The main cause of the company’s financial woes, in
addition to the decline in newsprint sales that we are all suffering, is that 4 years ago DST invested
$15m in a new print factory in the centre of Borland. The printing technology was state of the art
at that time and, even today, is better than anything else on the market. However, the debt taken
on to fund the development is due for repayment in 12 months’ time, and DST does not have the
funds.

Jack struggled to contain his emotions during our chat; like me, his family has been in the
newspaper industry for many generations, and the prospect of it all ending whilst he is in charge is
unthinkable. He owns all the share capital in DST, but is prepared to sell the company for $1
rather than see it liquidated. He feels an obligation to staff to preserve as many jobs as possible,
and also keep the DST brand going. He asked me if FNG might be interested in taking DST over.

This presents many opportunities for us. As we continually need to cut costs, it seems inefficient
to me that we continue to have 2 print factories in the North and South of the country - acquiring
DST would mean that we could rationalise our print operations into just 1 factory from which we
can serve the whole country.

What do you think? I would like this to be the first item on the agenda at our discussion at 9am
tomorrow.

24 KAPLAN PUBLISHING