[NationsBanc Montgomery Securities Letterhead]
February 28, 1998 Exhibit 7
Special Committee of the Board of Directors
First Alert, Inc.
3901 Liberty Street Road
Aurora, IL 60504-8122
ATTN: John R. Albers
Albert L. Prillaman
Gentlemen:
We understand that First Alert, Inc., a Delaware corporation
("Seller"), Sunbeam Corporation, a Delaware corporation ("Parent"), and Sentinel
Acquisition Corp., a Delaware corporation ("Buyer"), propose to enter into an
Agreement and Plan of Merger dated as of February 28, 1998 (the "Merger
Agreement"). Pursuant to the Merger Agreement, we understand that Buyer will
make a cash tender offer (the "Offer") for each outstanding share of the common
stock, $ .01 par value per share, of Seller ("Seller Common Stock") at a price
per share of $5.25 (the "Consideration") and that thereafter Buyer will be
merged into Seller in a transaction in which each outstanding share of Seller
Common Stock (other than shares held by Buyer or Parent) will be converted into
the Consideration (the "Merger"). The terms and conditions of the Offer and the
Merger are set forth in more detail in the Merger Agreement.
You have asked us for our opinion as investment bankers as to whether
the Consideration to be received by the stockholders of Seller (other than Buyer
or Parent) pursuant to the Offer and the Merger is fair to such stockholders
from a financial point of view, as of the date hereof. As you are aware, we were
not retained to nor did we advise Seller with respect to alternatives to the
Offer or the Merger or Seller's underlying decision to proceed with or effect
the Offer or the Merger. Further, we were not requested to nor did we solicit or
assist Seller in soliciting indications of interest from third parties for all
or any part of Seller.
In connection with our opinion, we have, among other things: (i)
reviewed certain publicly available financial and other data with respect to
Seller, including the consolidated financial statements for recent years and
interim periods to December 31, 1997 and certain other relevant financial and
operating data relating to Seller made available to us from published sources
and from the internal records of Seller; (ii) reviewed the financial terms and
conditions of the Merger Agreement; (iii) reviewed certain publicly
First Alert, Inc.
February 28, 1998
Page 2
available information concerning the trading of, and the trading market for,
Seller Common Stock and (iv) compared Seller from a financial point of view with
certain other companies in the home security and consumer durables industries
which we deemed to be relevant; (v) considered the financial terms, to the
extent publicly available, of selected recent business combinations of companies
in the home security and consumer durables industries which we deemed to be
comparable, in whole or in part, to the Offer and the Merger; (vi) prepared a
discounted cash flow analysis and compared these results to the Consideration;
(vii) reviewed and discussed with representatives of the management of Seller
certain information of a business and financial nature regarding Seller,
furnished to us by them, including financial forecasts and related assumptions
of Seller; (viii) made inquiries regarding and discussed the Offer and the
Merger and the Merger Agreement and other matters related thereto with Seller's
counsel; and (ix) performed such other analyses and examinations as we have
deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for Seller provided to us by Seller management, upon their advice and
with your consent we have assumed for purposes of our opinion that the forecasts
have been reasonably prepared on bases reflecting the best available estimates
and judgments of management at the time of preparation as to the future
financial performance of Seller and that they provide a reasonable basis upon
which we can form our opinion. We have also assumed that there have been no
material changes in Seller's assets, financial condition, results of operations,
business or prospects since the dates of its last financial statements made
available to us. We have relied on advice of counsel and independent accountants
to Seller as to all legal and financial reporting matters with respect to Seller
and the Merger Agreement, including the legal status and financial reporting of
litigation involving Seller. We have assumed that the Offer and the Merger will
be consummated in a manner that complies in all respects with the applicable
provisions of the Securities Exchange Act of 1934 and all other applicable
federal and state statutes, rules and regulations. In addition, we have not
assumed responsibility for making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of Seller, nor have we been furnished with any such appraisals.
Finally, our opinion is based on economic, monetary and market and other
conditions as
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February 28, 1998
Page 3
in effect on, and the information made available to us as of, the date hereof.
Accordingly, although subsequent developments may affect this opinion, we have
not assumed any obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Offer and the Merger
will be consummated in accordance with the terms described in the Merger
Agreement, without any further amendments thereto, and without waiver by Seller
of any of the conditions to its obligations thereunder.
We have been retained solely for the purposes of rendering an opinion
to the Special Committee of the Board of Directors of Seller as to the fairness
to the stockholders of Seller from a financial point of view of the
Consideration and will receive a fee for our services, the payment of which is
contingent on consummation of the Offer and the Merger. In addition, one of our
affiliates is a senior lender to Seller.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the stockholders of
Seller pursuant to the Offer and the Merger is fair to such stockholders from a
financial point of view, as of the date hereof.
This opinion is directed to the Special Committee of the Board of
Directors of Seller in its consideration of the Offer and the Merger and is not
a recommendation to any stockholder as to whether such stockholder should accept
the Offer or how such stockholder should vote with respect to the Merger.
Further, this opinion addresses only the financial fairness of the Consideration
to the stockholders and does not address the relative merits of the Offer and
the Merger and any alternatives to the Offer and the Merger, Seller's underlying
decision to proceed with or effect the Offer and the Merger, or any other aspect
of the Offer or the Merger. This opinion may not be used or referred to by
Parent, Buyer or Seller, or quoted or disclosed to any person in any manner,
without our prior written consent, which consent is hereby given to the
inclusion of this opinion in any proxy statement or tender offer statement filed
with the Securities and Exchange Commission in connection with the Merger
Agreement.
Very truly yours,
/s/ NationsBanc Montgomery Securities LLC
NATIONSBANC MONTGOMERY SECURITIES LLC