Selecting the Reorganization. Foods Galore owns and operates several chains of fine restaurants, including Burrito Greato, Boogie's Burgers, and Captain Hook Fish and Chips. It now wishes to get into the chicken business. To this end, it is negotiating with Uncle Jimmy's SouthernFried Chicken. Uncle Jimmy's has units primarily in the Rockies, including Colorado, Idaho, Wyoming, and Montana. It began negotiating with Uncle Jimmy's several weeks ago. How would each of the following factors affect the form of reorganization that may be used? Discuss briefly whether an A triangular Aforward or reverseB or C reorganization will work given each factor. Assume each is an independent case.
a Uncle Jimmy's has been under audit by the FDA for possible violation of health codes. In addition, the corporation's prioryear tax returns are currently under audit.
b While the principal shareholder, James Robert Smith, wants to push forward on the deal, two minority shareholders, Bubba Jones and Sissy Brown, want out. They will not take Foods stock but only cash.
c Several vocal shareholders who own significant interests in Foods do not want to pursue the deal.
d The state of Montana will not allow foreign corporations ie out of state to merge with Montana corporations.
e Uncle Jimmy's has a few units in Atlanta, where the company got its start. A few of these units do have favorable locations but are not making money since there are plenty of places in the South that offer Jimmy's brand of Southernfried chicken. Consequently, Foods is not interested in acquiring them.
f Uncle Jimmy's has leased the ground on which most of its units sit, and all but a few of these leases are for a long term and have favorable terms.
g Foods aiready owns a stake in Jimmy's, having acquired the stock last year for cash.
