Szln - Aquiring Pem Case Essay

8893 Words Sep 23rd, 2013 36 Pages
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SZLN: ACQUIRING PEM

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910N07

Xingyun Liu, Lifan Wu and Jim Hatch wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of
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Co. (Lingnan) in 1999. The major assets of Lingnan were the Fankou Lead Zinc Mine and the Shaoguan Smelter. At the time of the merger, Lingnan was China’s largest lead zinc ore mining company and China’s third largest lead zinc smelter. In January 1997, the company listed its stock on the Shenzhen Stock Exchange and, after the amalgamation, changed its name to Shenzhen Zhongjin Lingnan Nonfemet Co. Ltd. (SZLN). SZLN’s largest shareholder (at 38.22 per cent) was Guangdong Rising Assets Management Co. Ltd., a state-owned enterprise. As of 1999, lead zinc products contributed approximately 80 per cent to profits, construction material and decoration 10 per cent and trading approximately 6 per cent. Due to an economic downturn and continuously depressed demand for lead and zinc, the prices of lead and zinc fell to historical lows, resulting, in 2001, in a decline in SZLN’s net income of more than 75 per cent compared with 2000. In response, the company formed a new management team with Zhang Shuijian as the new CEO. This team instituted stringent cost controls and restructured the business to make lead and zinc products the company’s main focus. As a result of this restructuring, net income in 2002 increased by more than 30 per cent over the previous year, despite the low metal prices. By the end of 2006, the prices of lead and zinc metal were at their highest levels in 20 years (see Exhibits 1 and

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