1.If you were Mr. Cizik of Cooper Industries, would you try to acquire Nicholson File Company in May 1972? Why?
If I were Mr. Cizik of Cooper Industries, my decision would be trying to acquire Nicholson File Company. Why? For 3 reasons:
1.Nicholson File Company is a company that is financially healthy. With increase in sales in the last 5 years. Today is a very liquid company. Their liabilities are very well controlled. Opportunity cost reduction due to the merger and thus increases margins.
2.The opportunity presented to Nicholson File Company Cooper Industries is huge, because this purchase with Nicholson and its product line that would strengthen the industrial market is that Cooper has weaker.
3.Sales channels that Nicholson File Company have.
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)
According to the financial position of Nicholson File Company and its position in the market and its movements, the maximum price that Cooper Industries Nicholson can offer is between 50 and 51 dollars a share. This is related also by its book value per share which has increase year after year, but its market price has been fluctuating between 23 and 48 dollars per share for the last 5 years. As a price between 50 and 51 dollars a share is the maximum offering.
3.What are the concerns and what is the bargaining position of each group of Nicholson Stockholders?
4.On the assumption that the Cooper management wants to acquire the Nicholson Company, what offer must Cooper management make-in terms of price per share?
In terms of price per share, Cooper Industries could offer $ 50 per share and to avoid taxes, a swap of shares between Cooper and Nicholson could be a very good deal.
5.On the assumption that the Cooper management wants to acquire the Nicholson Company, what offer must Cooper management make to Nicholson management?
Coopers Industries and Nicholson could reach the following agreement in terms of operation. a)Laying off staff not make up past 5 years. b)Increased sales of 6% annually for the next five years. c)3 Seatings at the board of directors. d)Test the current administration to see if they could continue the business operation.
6.What should Mr. Cizik recommend that the Cooper management do?
a)Test the current administration to see if they could continue the business operation. b)Offer a 50 dollars per share.
