Essay on Cooper Industries

1169 Words Apr 5th, 2011 5 Pages
Advanced Financial Management
Cooper Industries Case

March 30, 2009

Jesse Van Gestel

Cooper Industries, Inc.

1. If you were Mr. Cizik of Cooper Industries, would you try to gain control of Nicholson File Company in May 1972?

2. What is the maximum price that Cooper can afford to pay for Nicholson and still keep the acquisition attractive from the standpoint of Cooper? [Treasury Bills yielded 5.6% in May 1972.]

3. What are the concerns and what is the bargaining position of each group of Nicholson stockholders? What must Cooper offer group in order to acquire its shares?

4. On the assumption that the Cooper management wants to acquire at least 80% of the outstanding Nicholson stock and make the same
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Though they would appreciate more liquid payments, they would most likely not be as concerned with this as Porter as many of them will not be specifically looking to get rid of their stock right away. These shareholders may be swayed to buy or not to buy based on what the Nicholson family and management suggested they do. Therefore, one of the best ways to reach these shareholders may be through the management.

Due to this influence, the Nicholson family and management have a greater bargaining position then their shares alone command. They are also interested in more than simply the price. Though the management is not opposed to a takeover, possibly because they no longer have a choice, they wish to see Nicholson remain autonomous within any company it is acquired by. The management and family are further most likely not willing to sell the majority of their shares for cash as they wish to remain involved in the company and have a stake in it. Cooper would therefore need to offer to exchange stock with them giving them a stake in the combined companies.

As VLN is competing to take over Nicholson it is unlikely that would be willing to sell their shares to Cooper for any reasonable price.

To own 80% of the outstanding shares of Nicholson Cooper will have to acquire the management and family’s share and half of the speculators shares and unaccounted for shares as well as Porter’s. Cooper already knows that it can acquire

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