Case study 3: Strong LLC is operating its poultry business successfully for the past 21 years in Sultanate of Oman The owners of the company decided to try their hand in baked food products like cakes, pastries and cookies. The new business is likely to produce great results that is what the feasibility study says. If the feasibility study is to be believed, it also states that it will create many direct employment opportunities which includes production. accounting, marketing etc and it also has the capacity to generate many indirect employment opportunities like sales jobs, drivers for transporting and alike. Many market reports suggest that people have become more dependent on readymade food available in the market due to the time constraint. They don't have time to cook their own food. In another 10 years, cooking at home will be a mystery for many. In such a situation, the demand for bakery products is set to increase. A sizeable demand for the food products to be manufactured by the company is expected to come from restaurants, bakery, biscuit making, Fast food chains, Grocery stores etc. Providing healthy baked food products is the necessity to succeed in the business. But healthy food alone will not help in the success of the business, in order to eam profits, the corporation has to work out on some plans like reaching out to the customers through TV, Radio and setting up stalls to promote the products. These efforts would have a positive impact on the sales and profits according to the promoters. When promotion combined with quality products are offered in the market at reasonable prices, there will be a change in customers' loyalty which will shift them towards their newly launched products. Customers' loyalty means increase in sales subsequently resulting in more profits. Estimations based on the business plan signaled that it would need at least OMR 55 million Initial set up cost would be 30 million and remaining amount would be required over a period of 3 years. This estimation came as a shock to the promoters as they are not in a position to garner such a mammoth amount to start the new business. After brainstorming they came up with the idea of setting up a public limited company (S.A.O.G). With its current market, Strong LLC has a very good customer base and reputation In consultation with legal and auditing professionals SSG consultants it is understood the process of setting up a public limited company i.e., SAOG, certain legal procedures and steps are required to be followed. Omani Commercial Companies law provides with the details of the procedure to be followed and rules to be abided by for setting up a public limited company. Strong LLC started with the process of formation of Strong S.A.O.G. The company was to be registered with an authorized capital of OMR 55 million divided into ordinary shares of 100 baiza each. To aid the process of raising the initial amount the promoter decided to contribute 20% by subscribing to shares and 50% was decided to be raised by making an initial public offering. For the remaining initial amount, it was decided to take a bank loan from Bank Sohar. The offer opening and closing Date was 19 October 2019 - 10 October 2019. Bank Sohar SAOG was appointed as the issue manager and the all nationalized Omani Bank were to be the collection banks. Reporting accountants were PricewaterhouseCoopers, appointed auditors were KPMG. Legal Adviser to were MJ & Co. Barristers & Legal Consultants and Marketing Adviser were LMG Duo Each single share carried the right to one vote at any general meeting Offer price for each share was at a premium of 10% along with an additional share issue expense of 2 baiza per offer share. Purpose of the IPO is to comply with the obligations stipulated in the Oman commercial law with regards to company formation Persons eligible for Offer Shares can be Omani and non-Omani individuals and juristic persons who apply a minimum of 500 Offer Shares and in multiples of 100 Shares Persons prohibited from subscribing to the Offer are the following: Sole proprietorship establishments: The owners of sole proprietorship establishments may only submit Applications in their personal names. Trust accounts: Customers registered under trust accounts may only submit Applications in their personal names. Multiple Applications: An Applicant may not submit more than one Application Joint Applications: Applicants may not submit applications in the name of more than one individual (including on behalf of legal heirs). All such Applications will be rejected without contacting the Applicant. Proposed allocation procedure: In case of oversubscription, for the purpose of allocating the Offer Shares between the eligible investor groups, the allocation of the Offer Shares will be 1:5. The maximum limit of shares allotted to an individual cannot be more than 50,000 shares. The company's issue was oversubscribed by 3.2 times of which 0.2 times were prohibited investors whose application was rejected. Of all the qualified investors' allotment was made pro-rata. Excess amounts were refunded within three days You are required to analyse the given situation and detail out the following: a. Justify whether forming Strong S.A.O.Gwas an appropriate solution to Strong LLC expansion problem. Also brief out the various reasons that inspired Strong LLC to take such decisions. (3 marks - Min 150 words) b. List out the limitations set by the company with regards to the subscription of shares by the public? Was the company able to qualify with the minimum subscription criteria? Justify with necessary fact and figures? (3 marks - Min 150 words) 6. Calculate the issue price, total number of share applications received, total number of shares rejected, total number of shares allotted and share capital structure of Strong S.A.O.G. after the IPO. Show necessary working notes. (4 marks) Case study 3: Strong LLC is operating its poultry business successfully for the past 21 years in Sultanate of Oman The owners of the company decided to try their hand in baked food products like cakes, pastries and cookies. The new business is likely to produce great results that is what the feasibility study says. If the feasibility study is to be believed, it also states that it will create many direct employment opportunities which includes production. accounting, marketing etc and it also has the capacity to generate many indirect employment opportunities like sales jobs, drivers for transporting and alike. Many market reports suggest that people have become more dependent on readymade food available in the market due to the time constraint. They don't have time to cook their own food. In another 10 years, cooking at home will be a mystery for many. In such a situation, the demand for bakery products is set to increase. A sizeable demand for the food products to be manufactured by the company is expected to come from restaurants, bakery, biscuit making, Fast food chains, Grocery stores etc. Providing healthy baked food products is the necessity to succeed in the business. But healthy food alone will not help in the success of the business, in order to eam profits, the corporation has to work out on some plans like reaching out to the customers through TV, Radio and setting up stalls to promote the products. These efforts would have a positive impact on the sales and profits according to the promoters. When promotion combined with quality products are offered in the market at reasonable prices, there will be a change in customers' loyalty which will shift them towards their newly launched products. Customers' loyalty means increase in sales subsequently resulting in more profits. Estimations based on the business plan signaled that it would need at least OMR 55 million Initial set up cost would be 30 million and remaining amount would be required over a period of 3 years. This estimation came as a shock to the promoters as they are not in a position to garner such a mammoth amount to start the new business. After brainstorming they came up with the idea of setting up a public limited company (S.A.O.G). With its current market, Strong LLC has a very good customer base and reputation In consultation with legal and auditing professionals SSG consultants it is understood the process of setting up a public limited company i.e., SAOG, certain legal procedures and steps are required to be followed. Omani Commercial Companies law provides with the details of the procedure to be followed and rules to be abided by for setting up a public limited company. Strong LLC started with the process of formation of Strong S.A.O.G. The company was to be registered with an authorized capital of OMR 55 million divided into ordinary shares of 100 baiza each. To aid the process of raising the initial amount the promoter decided to contribute 20% by subscribing to shares and 50% was decided to be raised by making an initial public offering. For the remaining initial amount, it was decided to take a bank loan from Bank Sohar. The offer opening and closing Date was 19 October 2019 - 10 October 2019. Bank Sohar SAOG was appointed as the issue manager and the all nationalized Omani Bank were to be the collection banks. Reporting accountants were PricewaterhouseCoopers, appointed auditors were KPMG. Legal Adviser to were MJ & Co. Barristers & Legal Consultants and Marketing Adviser were LMG Duo Each single share carried the right to one vote at any general meeting Offer price for each share was at a premium of 10% along with an additional share issue expense of 2 baiza per offer share. Purpose of the IPO is to comply with the obligations stipulated in the Oman commercial law with regards to company formation Persons eligible for Offer Shares can be Omani and non-Omani individuals and juristic persons who apply a minimum of 500 Offer Shares and in multiples of 100 Shares Persons prohibited from subscribing to the Offer are the following: Sole proprietorship establishments: The owners of sole proprietorship establishments may only submit Applications in their personal names. Trust accounts: Customers registered under trust accounts may only submit Applications in their personal names. Multiple Applications: An Applicant may not submit more than one Application Joint Applications: Applicants may not submit applications in the name of more than one individual (including on behalf of legal heirs). All such Applications will be rejected without contacting the Applicant. Proposed allocation procedure: In case of oversubscription, for the purpose of allocating the Offer Shares between the eligible investor groups, the allocation of the Offer Shares will be 1:5. The maximum limit of shares allotted to an individual cannot be more than 50,000 shares. The company's issue was oversubscribed by 3.2 times of which 0.2 times were prohibited investors whose application was rejected. Of all the qualified investors' allotment was made pro-rata. Excess amounts were refunded within three days You are required to analyse the given situation and detail out the following: a. Justify whether forming Strong S.A.O.Gwas an appropriate solution to Strong LLC expansion problem. Also brief out the various reasons that inspired Strong LLC to take such decisions. (3 marks - Min 150 words) b. List out the limitations set by the company with regards to the subscription of shares by the public? Was the company able to qualify with the minimum subscription criteria? Justify with necessary fact and figures? (3 marks - Min 150 words) 6. Calculate the issue price, total number of share applications received, total number of shares rejected, total number of shares allotted and share capital structure of Strong S.A.O.G. after the IPO. Show necessary working notes. (4 marks)