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Case Study -Cooper Industries Essay

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Cooper Industries
Case Study
Jonathan De Leon
Ann Lewis
Mary J. Roy
Crystal Vincent

University of Phoenix Online
Advanced Problems in Finance
FIN 545
William Crockett
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…

Additionally, Wall Street investors would view the maintenance of Nicholson management as a stabilizing factor in the merger. Loss of product lines – Whichever company acquired Nicholson, there was no doubt that aggressive cost cutting measures would be pursued; this would undoubtedly mean marginal product lines would cease to exist. Although Cooper could not emphatically guarantee that nothing would change, they could guarantee that they would work with Nicholson to determine if improvements could be made to product lines at risk and thereby maintain their existence, or at the least--include Nicholson management in the decision making alternatives.
H.K. Porter Stock valuation - If the merger with VPN were successful, Porter would receive VLN preferred stock for their 177,000 Nicholson shares. VLN stock performance had been dreary, and did not show any signs of growth in the short-term. This would make it difficult for them to sell the shares of VLN on the American Stock Exchange which does not trade in large blocks. Additionally, from the years 1968 to 1971, VLN net sales had grown only 3% from $97 million to $100 million. Net income actually decreased by almost 7% for the same time period from $3.2 million to $2.98 million. Quick Sale – Porter will most likely sell their shares

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