Several years ago, Penston Company purchased 90 percent of the outstanding shares of Swansan Corporation. Penston made the acquisition because Swansan produced a vital component used in Penston’s manufacturing process. Penston wanted to ensure an adequate supply of this item at a reasonable price. The former owner, James Swansan, retained the remaining 10 percent of Swansan’s stock and agreed to continue managing this organization. He was given responsibility for the subsidiary’s daily manufacturing operations but not for any financial decisions.
Swansan’s takeover has proven to be a successful undertaking for Penston. The subsidiary has managed to supply all of the parent’s inventory needs and distribute a variety of items to outside customers.