Early in 1972, Nicholson's father rebuffed a takeover attempt by HK Porter Company Inc., which controlled 30.5% of the company's stock. Porter made a cash tender offer to shareholders. However, Porter did not obtain enough stock to take over Nicholson. In trying to fight the takeover, Nicholson made several merger proposals to other companies like VLN Corp. A few years ago, she rejected an offer from Cooper Industries. Cooper Industries & NicholsonCooper was interested in Nicholson because of its competitive strength in the hand tool industry. . Nicholson had a 50% share for folders and packaging with a very strong brand and high quality line. It also had a 9% share in the 200 million hand saws and saw blades market with excellent brand and quality. It had a very efficient and extensive distribution system in the United States, Canada and abroad. Cooper Industries estimates that Nicholson can achieve annual sales growth of 6% and also reduce cost of goods sold by 69% to 65% and selling and administrative expenses by 22% to 19%, thereby increasing its profitability. Cooper would be able to use Nicholson's distribution system to cross-sell Cooper's hand tool lines into industrial and consumer markets. Cooper predicted that the Nicholson acquisition would reduce its earnings volatility and Nicholson is currently in the merger market to fend off the HK Porter raid. Company. Valuation of the Nicholson file (without merger) Please see tables 1 and 3 for more details and assumptions. Assuming that Nicholson will continue to have sales growth equal to 2% with a cost of goods sold at 69% of net sales, its market price will remain in the range ($19 to $27 in 1972) and ($22 to $31 in 1976) due to operational inefficiency...... middle of paper ...... stronger growth in its product lines, with a stronger balance sheet. Nicholson shareholders, according to the attached Table 2, will get a PE ratio of 14 to 17, compared to 10 to 14 currently. EPS will increase from $2.28 in 1971 to $5.72 in 1973, after the merger. Cooper provides a growth opportunity for Nicholson's product lines and its $50/share offering will attract unaccounted for and speculatively held shares. Cooper Industries already has the support of 206,000 (35%) shares and needs an additional 86,000 shares to achieve a 50.1% majority required under Rhode Island merger law. According to Exhibit 8 attached, Cooper will be able to obtain this majority of 50.1%. Additionally, Cooper's shares trade on the New York Stock Exchange and will provide greater liquidity to Nicholson shareholders. It will be in the best interest of Nicholson Management to agree to this friendly merger..