Danaher Proposes Merger With Cooper Industries In
Stock-And-Cash Transaction Valued at up to $58 Per Share
WASHINGTON, Aug. 1 -- Danaher Corporation today
announced that it has made a proposal to Cooper Industries, Inc.
for a merger through a stock-and-cash transaction valued at $54 to $58 per
Cooper share, or a total value of approximately $6.5 billion to $7 billion
including assumed debt, based on recent Danaher share prices. The offer
represents a 30% to 39% premium over Cooper's closing stock price yesterday
and a 38% to 48% premium over Cooper's average share price over the past three
months.
Danaher said the proposed strategic combination would create a significant
global enterprise with combined revenues in excess of $8 billion, operating
profit in excess of $1.2 billion, a strong balance sheet and leverageable
strengths across many product platforms that would drive revenue growth,
reduce costs and improve operational efficiency. Danaher expects the
transaction to be at least 10% accretive to its cash earnings per share in the
first year based on modest synergies.
Danaher President and Chief Executive Officer H. Lawrence Culp, Jr. said,
"This is a compelling transaction for both companies from both an industrial
and financial perspective. Cooper's product portfolio is highly complementary
to Danaher's, adding significant scale to our power quality and reliability
product lines, bringing a strong portfolio of leading electrical products
brand franchises, and significantly enhancing the product offering we provide
our electronic, electrical, and industrial distribution customers. In
addition, the strength of the combined balance sheet and free cash flow will
create new opportunities for growth and superior shareholder return. We
believe Cooper shareholders will find our proposal preferable to Cooper's
proposed reincorporation in Bermuda, especially given Danaher's long history
of superior performance relative to both market indices and Cooper's shares.
We are deeply committed to achieving a mutually beneficial negotiated
transaction with Cooper and we stand ready to meet with Cooper at any time."
Danaher has proposed a merger in which Cooper shareholders would receive
consideration consisting of 75% Danaher stock and 25% cash. Specifically,
each Cooper share would be converted into $14.50 in cash and 0.7650 Danaher
shares at the high end of the proposed range, or $13.50 in cash and
0.7123 Danaher shares at the low end of the proposed range (subject to cash
elections if desired). The Danaher proposal would provide a value of $54.00
to $58.00 for each Cooper share based on Danaher's closing share price on
July 20, 2001, the day before the two companies met to discuss Danaher's
proposal.
The following letter was sent by Mr. Culp on July 25, 2001 to Mr. H. John
Riley, Jr., Chairman and Chief Executive Officer of Cooper Industries:
Dear John:
Pat Allender and I enjoyed meeting with you, Brad McWilliams and Dave
White this past Saturday to discuss our proposal for a business combination
between Danaher Corporation and Cooper Industries, Inc. We appreciate your
time, as well as your assurance that our offer will be relayed to and duly
considered by the Cooper Board of Directors. As we indicated to you, however,
in light of the accelerated timetable for the shareholder vote to consider
your proposal to reincorporate Cooper in Bermuda and the fact that we are
offering a substantial premium to Cooper shareholders, we believe it would be
appropriate for our proposal to be considered more promptly than at your next
scheduled Board meeting on August 7. I thought it would be useful to
memorialize for you and to set out for the Cooper Board of Directors the
specifics of our proposed business combination so that your Board will have
the benefit of our thinking and be able to consider our proposal fully and
expeditiously.
As you know, we at Danaher have for some time believed that a combination
of our two companies would create an exciting global enterprise with critical
mass and leverageable strengths across many product platforms that would drive
revenue growth, reduce costs and improve operational efficiency. Such a
merger would be extremely compelling from both an industrial and a financial
perspective. With combined revenues in excess of $8 billion and annual
operating profit well in excess of $1 billion, the combined company would have
a powerful financial base from which to further enhance growth both
organically and through acquisitions. The strength of the combined balance
sheet and the new opportunities that will be created will deliver superior
returns to our combined shareholder base with benefits flowing to our
customers, associates, suppliers and other constituencies as well. The
excellent fit between our two companies is evident to us not only in the
complementary nature of our businesses along product and geographic lines, and
in our mutual commitment to operating excellence, but also in our strategic
vision. You have made it clear that your primary reasons for proposing to
reincorporate Cooper in Bermuda are the opportunity to enhance cash flow and
with the additional cash be a more effective player in the consolidating
sectors in which we both operate. As you will recall, this was the essential
rationale for combining our two fine companies that my predecessor, George
Sherman, emphasized in his letter to you on August 17, 1999. It was prescient
then and is even more persuasive today. We believe that a combination with
Danaher would accelerate the fulfillment of your own desired objectives.
It has been almost two years since you rejected George's proposal for a
merger, which also offered a significant premium to Cooper's shareholders, in
order to pursue your business strategy independently. Because you had no
interest in pursuing a negotiated transaction, we did not pursue the matter at
that time, although we continued to believe in the tremendous value of
combining our two companies. A comparison of our respective companies'
financial results and share price performance from that time clearly indicates
that your shareholders would have realized significant additional value had
you accepted our earlier proposal. Since the date of George's letter to you,
Danaher's stock has outperformed Cooper's stock and the S&P 500 by
25 percentage points and 7 percentage points, respectively (a trend that has
held true for the past three, five and ten year periods as well).
Your recent decision to seek shareholder approval for a major
reorganization and reincorporation of Cooper in Bermuda prompted us to
formally re-propose a combination of Cooper and Danaher. We firmly believe
that our merger proposal represents a far more attractive near-term and
long-term alternative to Cooper's shareholders than your proposed
restructuring plan. The significant tax and other costs involved in migrating
Cooper offshore would be altogether avoided in a Danaher transaction which
would also provide your shareholders with an immediate and substantial value
boost. More important even than our own view, we are convinced that your
shareholders will overwhelmingly agree with this assessment and will not want
to incur the costs of the move offshore in light of our proposal. We note with
interest the limited impact on your share price that has resulted from your
announced plan.
For all the above reasons, we have proposed to you a merger in which the
Cooper shareholders will receive consideration consisting of 75% Danaher stock
and 25% cash. Specifically, as we conveyed to you and your team when we met
on July 21, our proposal is to structure the transaction as a merger in which
each Cooper share would (subject to shareholder elections and proration as
desired) be converted into $14.50 in cash and 0.7650 Danaher shares at the
high end of our proposal or $13.50 in cash and 0.7123 Danaher shares at the
low end of our proposal. As we discussed, this offer would provide a value of
$54.00 to $58.00 for each Cooper share based on the Danaher closing price on
the day prior to our meeting, which represented a 33% to 43% premium over
Cooper's closing stock price on the same day and a 40% to 50% premium over the
average Cooper closing stock price for the prior three months. Based on
today's closing prices, our proposal represents a 35% to 45% premium to
Cooper's stock price. While our proposal is based on our review and analysis
of publicly available information regarding Cooper, we expect that
confirmation of our understanding of Cooper's financial results and outlook
through a due diligence review of Cooper's business (which we believe could be
completed in as little as two weeks) would allow us to finalize a combination
proposal at the high end of our range. We believe that a transaction with a
substantial component of Danaher stock (in addition to a significant cash
component) would be enthusiastically received by your shareholders as it
offers a significant participation in the growth and synergy prospects of a
much stronger combined company.
It is our view, and we are pleased that your team seems to agree, that a
combination of our companies would have no significant contingencies and that
this transaction can be completed expeditiously. We are ready to undertake a
mutual due diligence review at your earliest convenience and to meet with your
team to negotiate a merger agreement at any time.
We believe ardently in the wisdom and strategic value of this transaction
and the benefits that it offers to our combined shareholders and other
stakeholders. I sincerely hope that you and Cooper's other directors will
share our enthusiasm. As I said above, we feel strongly that an offer as
compelling as this warrants prompt and thorough consideration by your Board at
a special meeting and should not languish "on the back burner" for two weeks,
particularly while you are actively soliciting your shareholders to support
your alternative reincorporation plan. Accordingly, we would hope to hear
back from you by the close of business on Monday, July 30 as to your Board's
considered view of our proposal.
This matter has the highest priority for us at Danaher and we are
committed to work with you in any way we can to expeditiously bring this
vision to fruition. I look forward to continuing our discussions soon and
hopefully working together to bring about a transaction in which everyone
wins.
Sincerely,
H. Lawrence Culp, Jr.
President and Chief Executive Officer
Danaher Corporation is a leading manufacturer of Process/Environmental
Controls and Tools and Components. (http://www.danaher.com )
SOURCE Danaher Corporation
