Exhibit 6 - Cooper Industries Balance Sheet - in millions of Dollars

Cash
Accounts Recievable
Inventories
Other
Current Assets
Net Plant & Equipment
Other
Total assets
Accounts Payable
Accrued Taxes
Long - Term Debt Due
Current Liabilities
Long Term Debt
Deferred Taxes
Preferred Stock
Common Equity (4,218,691 shares outstanding)
Total Liabilities & Net Worth
Number of Shares Outstanding
Book Value
Debt / (Debt + Equity) Ratio
Debt to Sales Ratio
Interest Coverage
Cooper's 1972 return from the merger (Nicholson
Earning/Value paid by Cooper)

1971
9
49
57
2
117
47
8
172

Pre-merger Post-merger
1972
1972
9.54
10.56
51.94
60.1
60.42
78.78
2
3
123.9
152.44
47
63
8
11
178.9
226.44

30
3
5
38
34
4
11
85
172

32
3.33
5
40.33
34
4.24
11
89.33
178.9

4,218,691
20.14843
28.57%
16.50%
12

4,218,692
21.17481
27.57%
14.17%
25

Assumptions for Exhibit 6

Cooper buys 100% of the Nicholson File in a tax-free stock for stock exchange
Same level of Debt as before
Two Cooper shares for one Nicholson share at $23

34.04
3.33
7
44.37
46
4.24
11
120.83 Stock offer to Nicholson
226.44
27,750,000
5,425,214
23 1,206,522
22.27193357
27.57%
15.40% 5488257
18

584,000

11.09% Greater then the T-bills 5.72 return in 1972

0.484036

584000

Exhibit 3 - Nicholson File Balance Sheet - in millions of Dollars

Cash
Accounts Recievable
Inventories
Other
Current Assets
Net Plant & Equipment
Investment in subsidiaries
Total assets

1971
1.00
8.00
18.00
1.00
28.00
16.00
3.00
47.00

Before merger
1972
1.02
8.16
18.36
1
28.54
16
3
47.54

Accounts Payable
Other
Current Liabilities
Long Term Debt
Deferred Taxes
Preferred Stock
Common Equity (4,218,691 shares outstanding)
Total Liabilities & Net Worth

2.00
2.00
4.00
12.00
0.00
0.00
31.00
47.00

2.04
2
4.04
12
0
0
31.5
47.54

584,000
27.91%
21.70%
4
24.00
43.40%

584,000
27.59%
21.27%
3
24.50
43.44%

Number of Shares Outstanding

Debt / (Debt + Equity) Ratio
Debt to Sales Ratio
Interest Coverage
Working Capital
Working Capital / sales

Assumptions for Exhibit 3

Sales growth equal to 2 %, which is the current growth rate, as given in the case
Same level of Debt as before

Exhibit 5 - Cooper Industries Mergered with Nicholson File Condensed Operating and Shareholder
Information - in millions of Dollars
Operations
Net sales
Cost of goods sold
Depreciation
Selling and administrative
expenses
Interest expense
Income before taxes
Income taxes
Income before
extraordinary items
Preferred dividend
Net income applicable
to common stock
Percentage of Sales
Cost of goods sold
Selling and administrative
expenses
Income before taxes
Interest Expense
Income tax Rate
Common stock
Number of shares
outstanding
Earnings per share before
extraordinary items
Dividend per share
Book value per share
Market price
Price-earnings ratio
Book value of the firm
Share price expected - Min

1967

1968

1969

1972

1973

1974

1975

198.00
141.00
4.00

206.00
145.00
5.00

212.00
154.00
4.00

298.62
218.56
6.23

316.54
231.60
6.36

335.53
245.54
6.50

355.66
260.21
6.65

23.00
1.00
29.00
13.80

25.00
2.00
29.00
15.10

29.00
3.00
22.00
11.40

29.00
4.00
25.00
12.60

29.00
1.00
11.00
5.40

41.88
1.80
30.15
15.08

44.39
1.80
32.38
16.19

47.05
1.80
34.64
17.32

49.88
1.80
37.12
18.56

15.20
1.00

13.90
0.90

10.60
0.90

12.40
0.90

5.60
0.90

15.08
0.90

16.19
0.90

17.32
0.90

18.56
0.90

14.20

13.00

9.70

11.50

4.70

14.18

15.29

16.42

17.66

71.2%

70.4%

72.6%

72.6%

78.2%

73.2%

73.2%

73.2%

73.2%

11.6%
14.6%
0.5%
47.6%

12.1%
14.1%
1.0%
52.1%

13.7%
10.4%
1.4%
51.8%

12.8%
11.1%
1.8%
50.4%

14.1%
5.3%
0.5%
49.1%

14.0%
10.1%
0.6%
50.0%

14.0%
10.2%
0.6%
50.0%

14.0%
10.3%
0.5%
50.0%

14.0%
10.4%
0.5%
50.0%

4,218,691 4,218,691 4,218,691 4,218,691 4,218,691

5,425,214

5,425,214

5,425,214

5,425,214

1.11
1.40
18.72
18 to 38
16 to 34

2.61
1.40
19.93
37 to 44
14 to 17

2.82
1.40
21.35
39 to 48
14 to 17

3.03
1.40
22.98
42 to 51
14 to 17

3.26
1.40
24.83
46 to 55
14 to 17

69,313,093 72,814,607 77,117,671 83,023,839 78,973,896

108,141,142

115,836,869 124,660,058

134,724,356

3.37
1.20
16.43
23 to 59
7 to 18
7

3.08
1.25
17.26
36 to 57
12 to 19
12

2.30
1.40
18.28
22 to 50
9 to 22
9

1970

1971
Cyclical
Down-turn
226.00
206.00
164.00
161.00
4.00
4.00

2.73
1.40
19.68
22 to 35
8 to 13
8

16

37

39

42

46

Share price expected - Max

18

19

22

13

34

44

Assumptions for Exhibit 5

Tax rate from 1972 onwards as 50% based on the historical average of last 5 years (1967 to 1971)
Same Interest expense for 1972 to 1976 as in 1971
Selling & administrative expenses growing at 6 % for 1972 and onwards
Same depreciation expenses for 1972 to 1976 as in 1972
Net Sales growth at 6% Industry average
Cost of goods sold expenses growing at 6% along with sales
Preferred dividend at $0.90 for 1972 onwards
Dividend per share $1.40, same as in 1971
Price Earnings ratio of 14 to 17 as the industry average
In 1972, after the merger, the number of outstanding shares has increased to 5,425,214 shares
(About 2.08 Cooper shares issued for 1 Nicholson Share)

48

51

55

1976

377.00
275.49
6.81
52.87
1.80
40.03
20.02
20.02
0.90
19.12
73.1%
14.0%
10.6%
0.5%
50.0%

5,425,214
3.52
1.40
26.96
49 to 60
14 to 17
146,244,230

49

60

Exhibit 4 - Cooper Industries Condensed Operating and Shareholder Information - in millions of Dollars
Operations
Net sales
Cost of goods sold
Depreciation
Selling and administrative
expenses
Interest expense
Income before taxes
Income taxes
Income before
extraordinary items
Preferred dividend
Net income applicable to
common stock
Percentage of Sales
Cost of goods sold
Selling and administrative
expenses
Income before taxes
Interest Expense
Income tax Rate
Common stock
Number of shares
outstanding
Earnings per share before
extraordinary items
Dividend per share
Book value per share
Market price
Price-earnings ratio
Book value of the firm
Share price expected - Min

1967

1968

1969

1972

1973

1974

1975

1976

198.00
141.00
4.00

206.00
145.00
5.00

212.00
154.00
4.00

240.00
180.46
4.00

254.40
191.22
4.00

269.66
202.72
4.00

285.84
214.83
4.00

302.99
227.39
4.00

23.00
1.00
29.00
13.80

25.00
2.00
29.00
15.10

29.00
3.00
22.00
11.40

29.00
4.00
25.00
12.60

29.00
1.00
11.00
5.40

30.74
1.00
23.80
11.90

32.58
1.00
25.60
12.80

34.54
1.00
27.40
13.70

36.61
1.00
29.40
14.70

38.81
1.00
31.80
15.90

15.20
1.00

13.90
0.90

10.60
0.90

12.40
0.90

5.60
0.90

11.90
0.90

12.80
0.90

13.70
0.90

14.70
0.90

15.90
0.90

14.20

13.00

9.70

11.50

4.70

11.00

11.90

12.80

13.80

15.00

71.2%

70.4%

72.6%

72.6%

78.2%

75.2%

75.2%

75.2%

75.2%

75.0%

11.6%
14.6%
0.5%
47.6%

12.1%
14.1%
1.0%
52.1%

13.7%
10.4%
1.4%
51.8%

12.8%
11.1%
1.8%
50.4%

14.1%
5.3%
0.5%
49.1%

12.8%
9.9%
0.4%
50.0%

12.8%
10.1%
0.4%
50.0%

12.8%
10.2%
0.4%
50.0%

12.8%
10.3%
0.3%
50.0%

12.8%
10.5%
0.3%
50.0%

4,218,691 4,218,691 4,218,691 4,218,691 4,218,691

4,218,691

4,218,691

3.27
1.40
24.85
29 to 59
9 to 18

3.56
1.40
27.01
32 to 64
9 to 18

83,023,839 78,973,896 84,067,728 90,061,561 96,955,393 104,849,226

113,943,059

4,218,691 4,218,691 4,218,691

3.37
1.20
16.43
23 to 59
7 to 18

3.08
1.25
17.26
36 to 57
12 to 19

2.30
1.40
18.28
22 to 50
9 to 22

69,313,093 72,814,607 77,117,671

12

1970

1971
Cyclical
Down-turn
226.00
206.00
164.00
161.00
4.00
4.00

2.73
1.40
19.68
22 to 35
8 to 13
8

1.11
1.40
18.72
18 to 38
16 to 34
16

2.61
1.40
19.93
23 to 47
9 to 18
23

2.82
1.40
21.35
25 to 51
9 to 18
25

3.03
1.40
22.98
27 to 55
9 to 18
27

29

32

Share price expected - Max

18

19

22

13

34

47

Assumptions for Exhibit 4

Net Income fro 1972 to 1976 as given in Exhibit 8, based on case-writer's assumptions
Tax rate from 1972 onwards as 50% based on the historical average of last 5 years (1967 to 1971)
Same Interest expense for 1972 to 1976 as in 1971
Selling & administrative expenses growing at 6 % for 1972 and onwards
Same depreciation expenses for 1972 to 1976 as in 1972
Net Sales growth at 6% Industry average
Cost of goods sold expenses growing at 6% along with sales
Preferred dividend at $0.90 for 1972 onwards
Dividend per share $1.40, same as in 1971
Historical Price Earnings ratio of 9 to 18, ignoring 1971 which was considered a cyclical sales year as per case

51

55

59

64

Exhibit 1 - Nicholson File - Condensed Operating and Shareholder Information - in millions of Dollars
Operations
Net sales
Cost of goods sold
Depreciation
Selling and administrative
expenses
Interest expense
Other deductions
Income before taxes
Income taxes
Income before extraordinary
items
Preferred dividend
Net income applicable to
common stock
Percentage of Sales
Cost of goods sold
Selling and administrative
expenses
Income before taxes
Interest Expense
Income tax Rate
Common stock
Number of shares outstanding

Earnings per share before

extraordinary items
Dividend per share
Book value per share
Market price
Price-earnings ratio
Book value of the firm
Share price expected - Min
Share price expected - Max

1967

1968

1969

1970

1971

1972

1973

1974

1975

48.50
32.60
2.00

49.10
33.10
2.30

53.70
35.90
2.40

54.80
37.20
2.30

55.30
37.90
2.10

56.41
38.92
2.14

57.53
39.70
2.18

58.68
40.49
2.23

59.86
41.30
2.27

10.70
0.40
0.30
2.50
0.60

11.10
0.70
0.10
1.80
0.84

11.50
0.80
0.20
2.90
1.31

11.90
0.80
0.20
2.40
0.88

12.30
0.80
0.20
2.00
0.67

12.41
0.80
0.20
1.93
0.77

12.66
0.80
0.20
1.99
0.80

12.91
0.80
0.20
2.05
0.82

13.17
0.80
0.20
2.11
0.85

1.90
0.00

0.96
0.00

1.59
0.00

1.52
0.00

1.33
0.00

1.16
0.00

1.20
0.00

1.23
0.00

1.27
0.00

1.90

0.96

1.59

1.52

1.33

1.16

1.20

1.23

1.27

67.2%

67.4%

66.9%

67.9%

68.5%

69.0%

69.0%

69.0%

69.0%

22.1%
5.2%
1.2%
24.00%

22.6%
3.7%
2.1%
46.67%

21.4%
5.4%
2.2%
45.17%

21.7%
4.4%
2.2%
36.67%

22.2%
3.6%
2.1%
33.50%

22.0%
3.4%
2.1%
40.00%

22.0%
3.5%
2.0%
40.00%

22.0%
3.5%
2.0%
40.00%

22.0%
3.5%
1.9%
40.00%

584,000

584,000

584,000

584,000

584,000

584,000

584,000

584,000

584,000

3.25
1.60
45.66
33 to 46
10 to 14

1.64
1.60
48.03
35 to 48
21 to 30

2.72
1.60
49.31
29 to 41
10 to 14

2.60
1.60
50.20
25 to 33
9 to 13

2.28
1.60
51.25
22 to 32
10 to 14

1.99
1.60
51.64
19 to 27
10 to 14

2.05
1.60
52.09
20 to 29
10 to 14

2.11
1.60
52.59
21 to 30
10 to 14

2.17
1.60
53.17
22 to 30
10 to 14

26,665,440

28,049,520 28,797,040

29,316,800

29,930,000

30,156,324

30,417,862 30,715,320

19.88
27.83

20.48
28.67

21.09
29.53

31,049,414

21.72
30.41

Minimum Merger Valuation for

Cooper at $50 per share

Assumptions for Exhibit 1

Sales growth equal to 2 %, which is the current growth rate, as given in the case
Tax rate at 40% as given in the Exhibit 4
Cost of goods sold as the current rate of 69% of the net sales
Selling and administrative expenses at the current rate of 22 % of Net Sales
Price to earning ratio of 10 to 14, same as before
Dividend per share rate as 1.60 as before

27,750,000 Cooper already owns 29000 Nicholson shares

1976
61.06
42.13
2.32
13.43
0.80
0.20
2.18
0.87
1.31
0.00
1.31
69.0%
22.0%
3.6%
1.9%
40.00%

584,000
2.24
1.60
53.80
22 to 31
10 to 14
31,420,878

22.36
31.30

9000 Nicholson shares

Exhibit 2 - Nicholson File operating after merger with Cooper Industries - Condensed Operating and
Shareholder Information - in millions of Dollars
Operations
Net sales
Cost of goods sold
Depreciation
Selling and administrative
expenses
Interest expense
Other deductions
Income before taxes
Income taxes
Income before extraordinary
items
Preferred dividend
Net income applicable to
common stock
Percentage of Sales
Cost of goods sold
Selling and administrative
expenses
Income before taxes
Interest Expense
Income tax Rate
Common stock
Number of shares outstanding
Earnings per share before
extraordinary items
Dividend per share
Book value per share
Market price
Price-earnings ratio
Book value of the firm
Share price expected - Min

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

48.50
32.60
2.00

49.10
33.10
2.30

53.70
35.90
2.40

54.80
37.20
2.30

55.30
37.90
2.10

58.62
38.10
2.23

62.14
40.39
2.36

65.86
42.81
2.50

69.81
45.38
2.65

74.00
48.10
2.81

10.70
0.40
0.30
2.50
0.60

11.10
0.70
0.10
1.80
0.84

11.50
0.80
0.20
2.90
1.31

11.90
0.80
0.20
2.40
0.88

12.30
0.80
0.20
2.00
0.67

11.14
0.80
0.20
6.15
3.08

11.81
0.80
0.20
6.58
3.29

12.51
0.80
0.20
7.04
3.52

13.26
0.80
0.20
7.52
3.76

14.06
0.80
0.20
8.03
4.02

1.90
0.00

0.96
0.00

1.59
0.00

1.52
0.00

1.33
0.00

3.08
0.00

3.29
0.00

3.52
0.00

3.76
0.00

4.02
0.00

1.90

0.96

1.59

1.52

1.33

3.08

3.29

3.52

3.76

4.02

67.2%

67.4%

66.9%

67.9%

68.5%

65.0%

65.0%

65.0%

65.0%

65.0%

22.1%
5.2%
1.2%
24.00%

22.6%
3.7%
2.1%
46.67%

21.4%
5.4%
2.2%
45.17%

21.7%
4.4%
2.2%
36.67%

22.2%
3.6%
2.1%
33.50%

19.0%
10.5%
2.1%
50.00%

19.0%
10.6%
2.0%
50.00%

19.0%
10.7%
1.9%
50.00%

19.0%
10.8%
1.8%
50.00%

19.0%
10.9%
1.7%
50.00%

584,000

584,000

584,000

584,000

584,000

584,000

584,000

584,000

584,000

584,000

3.25
1.60
45.66
33 to 46
10 to 14

1.64
1.60
48.03
35 to 48
21 to 30

2.72
1.60
49.31
29 to 41
10 to 14

2.60
1.60
50.20
25 to 33
9 to 13

2.28
1.60
51.25
22 to 32
10 to 14

5.27
1.60
54.92
73 to 89
14 to 17

5.64
1.60
58.95
79 to 96
14 to 17

6.02
1.60
63.38
84 to 102
14 to 17

6.44
1.60
68.22
90 to 109
14 to 17

6.88
1.60
73.49
96 to 117
14 to 17

26,665,440

28,049,520 28,797,040 29,316,800 29,930,000 32,072,040 34,428,666 37,012,754 39,837,952 42,918,725

73.75

78.89

84.35

90.13

96.25

Share price expected - Max

89.55

95.80

Assumptions for Exhibit 2

Sales growth equal to 6 %, which is the expected industry growth rate, as given in the case
Tax rate at 50% as per Cooper's Historical Tax rate of 50%
Cost of goods sold as 65% of the net sales, as expected by Cooper industries
Selling and administrative expenses as 19% of Net Sales, as expected by Cooper Industries because of overlap
Price to earning ratio of 14 to 17, same as the leading companies in the industry
Dividend per share rate as 1.60 as before

102.42

109.44

116.88

Exhibit 8 - Distribution of Nicholson shares and Cooper Industries Support

Shareholder

Number of shares Range

Number of estimated
Approximate number Cooper Offer Nicholson shares in favor
of shares owned
Price ($)
of Cooper Industries

H K Porter
177000
Cooper Industries
29000
VLN supporting shares
Nicholson Family
117000
Owned by VLN
14000
Speculators
50000 to 100000
Unaccounted
197000 to 147000
584000

177000
29000

50
50

117000
14000
90000
157000
584000

50
50
50
50

177000
29000
0
0
0
45000
50000
301000

% in favor
of Cooper
merger

30.31%
4.97%
0.00%
0.00%
0.00%
7.71%
8.56%

Cumulative % in
favor of Cooper
Industries

30.31%
35.27%
35.27%
35.27%
35.27%
42.98%
51.54%

Cooper needs 292000 Nicholson shares for the merger

As Cooper offer price is above the last 52-week range of 22 to 32 and valuates the firm at $29.2 million which is near the book value of $30 million,
on the announcement of the Cooper-Nicholson merger, Cooper gets the support of 50% of the speculative shares and
Cooper gets support of the one-third of the un-accounted shares.
This gives Cooper Industries the simple majority of 51.54% above the 50.1% required as per RI merger law, to go ahead with the merger.
It is assumed that Cooper will eventually exchange 100% of the Nicholson shares for the Cooper shares
It will cost Cooper $27.75 million, as it already owns about 5% of the Nicholson Shares

Cooper Earnings per share

Exhibit 7 - Cooper Industries Earnings per share 1967 to 1976

4.00

3.50

3.00

2.50
Cooper pre-merger
Cooper EPS Trendline
Post-merger Cooper Earnings

2.00

1.50

1.00

0.50

0.00
1

Year

Page 17

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