Nicholson should also decide to go with Cooper Industries as its offer is much better then VLN offer. Cooper already
controlled some Nicholson stock (29,000) and had the backing of H.K. Porter which owned 177,000 of Nicholson shares,
as per exhibit 7 of the case. The synergies for a Nicholson and Cooper merger will increase the earnings for shareholders
of both the companies, as they can cross-sell their products across a wider market at a higher margin, with reduced
expenses. In the previous mergers, Cooper has kept the existing management and is planning to keep Nicholson’s
management on board, after the merger. This will free the Nicholson management to focus on stronger growth of its
product lines, with a stronger balance sheet. The Nicholson shareholders, as per Exhibit 2 attached, will get a PE ratio of
14 to 17, from the current 10 to 14 range. The EPS will go up from $2.28 in 1971 to $5.72 in 1973, after the merger.
Cooper offers a growth opportunity for Nicholson product lines and its offer at $50/share will attract the unaccounted
shares and the shares owned by speculative. Cooper Industries already has the support of 206,000 (35%) shares and
needs another 86,000 shares for a 50.1% majority needed as per Rhode Island merger law.
Nicholson should also decide to go with Cooper Industries as its offer is much better then VLN offer. Cooper already
controlled some Nicholson stock (29,000) and had the backing of H.K. Porter which owned 177,000 of Nicholson shares,
as per exhibit 7 of the case. The synergies for a Nicholson and Cooper merger will increase the earnings for shareholders
of both the companies, as they can cross-sell their products across a wider market at a higher margin, with reduced
expenses. In the previous mergers, Cooper has kept the existing management and is planning to keep Nicholson’s
management on board, after the merger. This will free the Nicholson management to focus on stronger growth of its
product lines, with a stronger balance sheet. The Nicholson shareholders, as per Exhibit 2 attached, will get a PE ratio of
14 to 17, from the current 10 to 14 range. The EPS will go up from $2.28 in 1971 to $5.72 in 1973, after the merger.
Cooper offers a growth opportunity for Nicholson product lines and its offer at $50/share will attract the unaccounted
shares and the shares owned by speculative. Cooper Industries already has the support of 206,000 (35%) shares and
needs another 86,000 shares for a 50.1% majority needed as per Rhode Island merger law.
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