Seltek Role Information
Seltek Role Information
Seltek Role Information
General Information
The Seltek plant is located in an area with many start-up, biotechnology companies. There is
an experienced, biotech work force in this area. Given the project nature of much of the work,
this work force is fairly mobile between companies.
Seltek purchased this plant form Biotech, a diversified chemical company, three years ago for
$15 million. Biotech was at the time in bankruptcy and needed cash badly, so this purchase
price may not be a good indicator of market value at that time.
Two years ago, the Seltek plant was appraised at $19 million. The local real estate market has
declined 5% since then. However, the Seltek plant is a unique property and general real estate
trends may not apply.
A plant similar to the Seltek plant, although newer, sold for $26 million nine months ago.
You are the CFO of Seltek, a pharmaceutical company with annual sales of $150 million, and
significant cash reserves. You would like to sell one of your plants that have been producing a
line of genetically-engineered compounds. These compounds are rapidly becoming obsolete
and Seltek has decided to get out of this business within the next year. The plant is uniquely
configured because of the peculiarities of manufacturing genetically-engineered compounds.
If you shut down the plant, strip it, and then sell the plant and equipment separately, you
estimate you would net a minimum of $17 million and that it would take you three months to do
so. Your preference is to sell the plant in its current configuration, and to a buyer who would
keep the current high quality, biotech experienced work force.
Biopharm, a pharmaceutical company with $700 million in annual sales, has expressed some
interest in the plant. They have inspected the plant and determined that it is suitable for their
purposes. They would also like to retain the work force. Their only expressed reservation is
that the location is 70 miles away from their corporate headquarters and R & D facility.
You are about to meet with the CFO of Biopharm. You have full authority to sell the plant for
whatever you can get. The price must be in cash and the deal must close within 60 days. No
other terms can be added to the negotiation.
1
This exercise was adapted from one developed by Professor Leonard Greenhalgh, Amos
Tuck School of Business Administration, Dartmouth College.