The weighted-average cost of capital of Euroland Foods was 10.6% in January 2001.
The board of directors of Euroland Foods had 12 members. Three members were the Verdin family, four members were managers, and the rest of five members were outside directors. The four biggest stockholders were members of the Verdin family, the combined company executive, Venus Asset Management, and Banque de Bruges et des Pays Bas. The firm's shares outstanding, each of four biggest stockholders held, were 20%, 10%, 12%, and 9%. The residual 49% of the company's shares outstanding were widely owned. The company's shares traded in Brussels and Frankfurt, Germany.
Euroland Foods sales were motionless since 1998. According to Exhibit 2, EUR30.00 million dividends every year from 1998 to 2000 led to low population growth in northern Europe and market saturation in some areas were caused by. Introduction of new products were failing. Most of managers wanted to improve the firm's market value through expanding the company's market presence and introducing more new products. Euroland Foods Company's debt-to-equity ratio was 125%. This debt-to-equity ratio was higher than its competitors. 125% debt-to-equity made the Banque du Bruges to encourage a debt reduction program strongly to Euroland. If leverage was increased beyond 125% debt-to-equity, any project could not be financed. Banque du Bruges considered the ability of paying debt back. It suggested cutting the dividends. The board of directors decided to limit capital spending to EUR 120 million in 2001.
The price-to-earnings ratio was lower than the average multiples of Euroland Foods' peers. The market value was lower than book value at a price-to-earnings ratio of 14 times. Euroland Foods Company failed to expand new product line. Venus Asset Management thought cutting the dividend is infeasible. .
Project 1. Replacement and expansion of the truck fleet. Heinz Klink made a plan.