Lester Electronics Financing Alternative Benchmarking Paper

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The research conducted in this document was based upon the key concepts of; mergers and options, determination of growth, recent trends in capital structure, financial leases/sale and lease back. The companies that have been included in this document are; Mcdonalds, Chipotle Mexican Grill, Cingular, Apollo Group, Captaris, Quest Diagnostics, and Whole Foods Market Inc.
Company Synopsis
Mcdonalds and Chipotle Mexican Grill
Mergers and Options

Mergers are structured as either cash-for-stock or stock-for- stock transactions. The selling transactions receive cash from the buyer in the first type of transaction and receive stock in the buying company in the second type of transaction. Mcdonald's initially invested in Chipotle in 1998 when the Denver based burrito restaurant had about 15 units, making chipotle the first concept other than its own McDonalds ever invested in. McDonalds grew to become Chipotle's largest investor in 2001. McDonald's investment helped chipotle build a national brand with more than 500 restaurant. "McDonald's original investment represented a strong vote of confidence in what Chipotle was doing at the time," said Steve Ells, founder, Chairman and CEO of Chipotle, who sought McDonald's as an investor to help finance the growth of his small burrito chain. "They have been a terrific partner for us, providing needed capital, shared access to other resources as needed, and also the autonomy to pursue our vision" (Arnold, 2006).

Mcdonald's offered to exchange up to an aggregate of 16,539,967 shares of Chipotle class B common stock which it owns for outstanding shares of McDonald's common stock, as described in more detail in the exchange offer prospectus. The exchange offer was designed to permit holders of McDonald's common stock to exchange their shares for shares of Chipotle class B common stock at a 10% discount to the calculate per share value of Chipotle class B common stock (Chipotle, 2006). For each $1.00 of McDonald's common stock accepted in the exchange offer, the tendering holder would receive approximately $1.11 of Chipotle Class B common stock, based on calculated per-share values.

The relevance of McDonalds best practice of common stock to Lester Electronics (LEI) is that LEI is in a quite similar situation. LEI sought after an opportunity that would place the company at a huge advantage. The choice for McDonalds to trade common stock with Chipotle Mexican Grill has been a huge success as far as broadening the company's horizons, expanding its growth potential and increasing its profitability. If LEI and Shang-Wa trade common stocks both company's would also benefit from the same transaction.
Cingular

Determination of Growth

Cingular Wireless is the largest wireless carrier in the United States, servicing 54.1 million customers. Cingular, a joint venture between AT&T Inc., formerly SBC Communication Inc., network in the nation -the ALLOVER (SM) network - and the largest mobile-to-mobile community of any national wireless carrier. Cingular is the only U.S. wireless carrier to offer Rollover (SM), the wireless plan that lets customers keep their unused monthly minutes (Garner, 2007).

Cingular wireless is known as the "Best Network" among national wireless carriers in the Bay Area, according to information provided by a leading independent research and advisory firm that provides information, insight and performance measures for the wireless industry. In 2005 Cingular Wireless invested $1 billion in California, including more than $275 million in the Bay Area. This investment added more than 200 new cell sites to the local network, including 43 new sites in Alameda, 18 in Contra Costa, four in Marin, 39 in San Francisco, 20 in San Mateo, 44 in Santa Clara, six in Santa Cruz, 14 in Solano and 16 in Sonoma counties. In addition to the new cell sites, the investment delivered other enhancements to improve customers' wireless experience, including portable generators, back-up batteries and new high-speed data features.

Cingular also rolled out its 3G high-speed broadband wireless network in the Bay Area in 2006. Cingular Broadband connect offers customers with a compatible device and service plan average data connections between 400-700 kilobits per second. In 2007, the company is expected to spend nearly $300 million in Northern California, which turn on-air approximately 260 more new cell sites to maintain Cingular's position as the best network. Nationally, the company spent $6 billion enhancing the network and is expected to invest a comparable amount in 2008. "It is great to see the investments we're making in our network are paying off for our customers," said Devereux, "Cingular's investment shows our commitment to deliver the best network quality and coverage, great new products and convenient services to our customers."

The company's network growth relies on advanced GSM/EDGE technology. EDGE is the fastest national wireless data network in the country. Globally GSM is used by more than 1.5 billion people in 200-plus countries. Cingular customers with a compatible device and service plan can make calls in more than 170 countries and access data services in more than 95 countries. Cingular also desires to be the first carrier in the world to operate commercial UMTS/HSDPA network, which provides industry-leading data throughout with speeds of 400 to 700 Kbps. Cingular has deployed UMTS/HSDPA in the San Francisco and San Jose areas and 14 other markets with plans ...