Case 12.1

In: Business and Management

Submitted By alexandralkarp
Words 590
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Case 12-1
An Unlikely Alliance?
Meyer Inc. (“Meyer”) and Saban Company (“Saban”) are investors in energy venture
Florabama, an independent power producer with one power plant located in the southwestern United States. Meyer owns 60 percent of Florabama, and Saban owns 40 percent of Florabama. Meyer and Saban obtained their ownership in Florabama in
February 2011 by contributing cash in a ratio equal to their ownership percentages. The terms of the venture arrangement permit Saban to purchase up to 20 percent of the power produced by Florabama at cost plus. Cost-plus arrangements are those when the buyer agrees to pay the cost of producing the goods plus a certain fee or rate. The fee or rate in this case is not a pertinent fact. The remainder of the power produced by Florabama is sold to third parties at market rates. The Articles of Incorporation of Florabama state the following in terms of governance and management of Florabama:


The Board of Florabama (the “Board”) comprises ten individuals: six individuals from Meyer and four individuals from Saban.



All strategic decisions regarding the operations of Florabama, such as establishing operating and capital budgets, determining the pricing of the power produced by
Florabama and the appointment of the CEO of Florabama (the “CEO”) must be presented to the Board and are determined by a simple majority vote.



The CEO is responsible for ensuring that the day-to-day operations of Florabama are executed in a manner consistent with the operating plan approved by the
Board.



The appointed CEO was the COO of Saban before the formation of Florabama and continues to be an employee of Saban after the formation of Florabama and the appointment to the CEO position of Florabama.

The sale, transfer, or disposition of the ownership interest in Florabama by either Meyer or Saban…...

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