Ziff Electrics (ZE) is a public utility that provides electricity to the whole Yorkshire region. Recent events
Question:
Ziff Electrics (ZE) is a public utility that provides electricity to the whole Yorkshire region. Recent events at its Mile-High Nuclear Station have been discouraging. Several shareholders have expressed concern over last year’s financial statements.
Recently, a wealthy group of individuals has offered to purchase half of ZE’s assets at fair market price. Management recommends that this offer be accepted because ‘We believe our expertise in the energy industry can be better exploited by ZE if we sell our electricity generating and transmission assets and enter the telecommunication business.
Although telecommunications is a riskier business than providing electricity as a public utility, it is also potentially very profitable.’
Should the management approve this transaction? Why or why not?
Step by Step Answer:
Corporate Finance
ISBN: 9780077173630
3rd Edition
Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe