Cooper Industries, Inc Essay Example

since they were unable to acquire enough shares, they are now trying to sell their shares.

They wish to make a profit from their stocks and their main concerns are the price and liquidity. Their goal is to obtain the highest possible amount of money from their stocks, so the price is crucial in their negotiations. Additionally, they would prefer to receive cash as it allows for quicker liquidation. However, they have indicated that they would also consider convertible preferred stock due to the stability and easy tradability of Cooper stock on the New York Exchange. The speculators and unidentified shareholders are primarily concerned with the price as well. While they would appreciate more liquid payments, this may not be as important to them as it is to Porter, since many of them are not urgently looking to sell their stock. The buying decisions of these shareholders may be influenced by the suggestions of the Nicholson family and management.

Therefore, the management is one of the best ways to reach shareholders. The Nicholson family and management have greater bargaining power due to their influence, not just their shares. They want Nicholson to remain autonomous in any acquisition. The management and family likely do not want to sell most of their shares for cash as they want to stay involved in the company.

Cooper needs to propose a stock exchange to acquire a stake in the combined companies from VLN, who is currently competing to take over Nicholson. It is unlikely that VLN would be willing to sell their shares to Cooper at a reasonable price. In order to own 80% of Nicholson's outstanding shares, Cooper will have to

acquire the management and family's shares, as well as half of the speculators' and unaccounted for shares, in addition to Porter's shares. Cooper is aware that it can obtain Porter's stocks by offering common or convertible Cooper shares worth at least $50. Thus, Cooper must offer this amount or higher to the other shareholders. Additionally, Cooper must reach an agreement with Nicholson's management to secure their approval for the deal, as acquiring the firm without their cooperation would be difficult and reaching 80% ownership would be impossible. As part of the takeover, Cooper must promise autonomy for the Nicholson firm within Cooper Industries.

They will also need to collaborate with management to address any other concerns they may have about integrating into Cooper, such as the availability of job positions for Nicholson management. Concluding an agreement with management on these concerns would make their offer of $50 worth of Cooper shares per Nicholson share acceptable. In contrast, VLN is offering Nicholson $50 worth of VLN stock, which is more volatile and less easily traded than Cooper stock, making the Cooper deal superior. Since both Porter and Nicholson management find this price and form of payment (stock options) acceptable, we can infer that a significant number of other shareholders would also accept this amount, especially if encouraged by management. Mr.

Cizik should advise Cooper management to propose a deal to acquire Nicholson. The proposed deal includes offering preferred Cooper shares that can later be converted into $50 worth of Cooper common stock. Cooper management should then negotiate with Nicholson management in order to obtain their support for the merger. It is important to note that without the support

of Nicholson's management, it is unlikely that Cooper will be able to successfully acquire the company. Given Cooper's previous record of pursuing friendly mergers, they would ideally prefer to continue this approach.