Case Study -Cooper Industries
Jonathan De Leon
Mary J. Roy
University of Phoenix Online
Advanced Problems in Finance
September 5, 2005
Cooper Industries Inc. Based on the given information in the case study regarding the acquisition of Nicholson File Company by Cooper Industries, there is no question that Cooper should try to gain control of Nicholson. This decision is based on an analysis of the bargaining positions of each group of Nicholson stockholders which have disparate goals and needs that need to be met. In addition, an appropriate payment method and specific dollar value based on a competitor's offer and Cooper financial data was decided. The remainder of …show more content…
Unaccounted For Shares and Spectator Shares Valuation and Sustainability This voting bloc has the same concerns as Porter relative to share pricing, but is more concerned with sustainability unlike Porter who is concerned with making a quick dollar. They own a lot more shares, estimated between 150,000-200,000 shares, and are not certain that VLN Corporation projected figures are truthful. VLN Corporation has not paid consistent dividends for many quarters, and has not shown any real growth, yet is still offering to match Nicholson's $1.60 dividend rate as part of the merger deal.
Shareholder Negotiations Both Nicholson and Porter had strong postures regarding the merger, and Cooper needed both companies to bless the merger to get it approved by a majority of the stockholders. Cooper only owned 29,000 shares and needed a total of 292,000 shares to gain a majority.
Nicholson and Unaccounted Shares The Nicholson family and management owned 117,000 shares. However, the speculation was that 150,000-200,000 of the unaccounted for shares would vote with the Nicholson family. This amount of shares would give Nicholson immense bargaining power. Cooper knew that their offer would have to be as good, if not better than VLN's offer, as Nicholson management wholeheartedly supported the merger