JEMODY
Transcript of Cooper Industries, Inc
Cooper Industries, Inc
Cooper Industries, Inc
Aaron, Kelsi, Luther, Stephanie, Tom, Will
Competition to Takeover and Opportunity for Cooper
Valuation
High Volatility Lead to Change in Acquisition Strategy
Nicholson File Company
Deal Structure
Recommendation
Presentation Outline
1. Background of Cooper Industries
2. Cooper Industries strategy
3. Target acquisition - Nicholson File Company
4. Other offers and what is now the opportunity for Cooper
5. Valuation
6. Recommendation
Background - Cooper Industries
Management Concerns
High dependence of sales to the oil and gas industries
High earnings volatility because of cyclical nature of machinery sales
Acquisition Strategy
Three criteria for new acquisitions:
Industry where Cooper could become a major leader
Stable industry with no reliance on large customers or a few large sales a year
Acquire only leading companies in their respective market segments
Recent acquisitions
The new strategy lead to Cooper acquiring three firms from 1967-1970
Lufkin Rule Company - worlds largest manufacturer of rulers and tapes
Crescent Niagara - well known, high quality wrenches, pliers and screwdrivers
Weller Electric Corporation - leading supplier of soldering tools
Nicholson File Company
Established 1864
Leading manufacturer of hand tools
Family dominated management
Past attempts to merge with Nicholson failed
Acquisition of Nicholson
Is it consistent with acquisition strategy?
Motive
Will acquiring Nicholson reduce instability in EPS?
Will it help stock price reflect true value?
Coopers motivation for acquisition
Five motives for acquisition
Undervaluation
Diversification
Synergies
Control
Management self-interest
Past acquisition strategy/motives
Diversification
Decrease instability in EPS
Cyclical nature of sales
Fluctuating oil price
4 acquisitions between 1959-1966
Cooper Industries, Inc
First to show an interest in
Cooper Industries, Inc
Cooper Industries, Inc
Aaron, Kelsi, Luther, Stephanie, Tom, Will
Competition to Takeover and Opportunity for Cooper
Valuation
High Volatility Lead to Change in Acquisition Strategy
Nicholson File Company
Deal Structure
Recommendation
Presentation Outline
1. Background of Cooper Industries
2. Cooper Industries strategy
3. Target acquisition - Nicholson File Company
4. Other offers and what is now the opportunity for Cooper
5. Valuation
6. Recommendation
Background - Cooper Industries
Management Concerns
High dependence of sales to the oil and gas industries
High earnings volatility because of cyclical nature of machinery sales
Acquisition Strategy
Three criteria for new acquisitions:
Industry where Cooper could become a major leader
Stable industry with no reliance on large customers or a few large sales a year
Acquire only leading companies in their respective market segments
Recent acquisitions
The new strategy lead to Cooper acquiring three firms from 1967-1970
Lufkin Rule Company - worlds largest manufacturer of rulers and tapes
Crescent Niagara - well known, high quality wrenches, pliers and screwdrivers
Weller Electric Corporation - leading supplier of soldering tools
Nicholson File Company
Established 1864
Leading manufacturer of hand tools
Family dominated management
Past attempts to merge with Nicholson failed
Acquisition of Nicholson
Is it consistent with acquisition strategy?
Motive
Will acquiring Nicholson reduce instability in EPS?
Will it help stock price reflect true value?
Coopers motivation for acquisition
Five motives for acquisition
Undervaluation
Diversification
Synergies
Control
Management self-interest
Past acquisition strategy/motives
Diversification
Decrease instability in EPS
Cyclical nature of sales
Fluctuating oil price
4 acquisitions between 1959-1966
Cooper Industries, Inc
First to show an interest in