Cooper Companies, Inc.
Summary & Advantages
Cooper Companies is looking to buy Nicholson Data file Company. It meets the three criteria that Cooper searches for in acquiring a firm. " 1st, the industry should be one out of which Cooper could turn into a major component. The sector must be pretty stable, having a broad industry for the products and a product or service line of вЂsmall ticket' things. Finally, it had to be a leading company within their respective marketplace segments. вЂќ
Two other companies are usually interested in Nicholson: VLN Organization and L. K. Assurer Company. Four decades ago, VLN and Nicholson management constructed a package that did not have the support from the most of the outstanding common stockholders. They prepared to exchange every single share of Nicholson common stock for one share of VLN favored stock, well worth a minimum of $53. 10.
After carrying out a discounted income analysis, it absolutely was determined that Nicholson inventory is undervalued. When the price benefits happen to be achieved the company is extremely undervalued. Therefore , Cooper could get Nicholson about friendly terms with a significant premium to attract the majority of the stocks and shares needed. Cooper has never " made an вЂunfriendly' purchase and this 1 was to become no exception. вЂќ The problem is whether Cooper will need to acquire Nicholson and if therefore , what is the maximum price they have to pay.
Analysis & Recommendation
While using provided presumptions, it was identified that the present value of Nicholson is definitely $46, 115, 000 towards the end of year 1971 (see Display A, W, C, and G). The retail price per reveal would be highly valued at $51. 57, employing Cooper's capital structure and with Nicholson's weighted common cost of capital (see Display D). This can be a $24. 07 big difference based on the closing value on 12 , 31, the year of 1971 of $27. 50.
Cooper thinks they will be able to reduce a number of the overlap costs after the obtain. First, they are going to eliminate a few of sales and advertising...