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COOPER INDUSTRIES, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DANAHER CORPORATION
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The following press release was filed by Danaher Corporation on August 1, 2001:
Contacts: Patrick Allender George Sard/Anna Cordasco/Dan Gagnier
Chief Financial Officer Citigate Sard Verbinnen
202/828-0850 212/687-8080
DANAHER PROPOSES MERGER WITH COOPER INDUSTRIES
IN STOCK-AND-CASH TRANSACTION VALUED AT UP TO $58 PER SHARE
WASHINGTON, D.C., AUGUST 1, 2001 - Danaher Corporation (NYSE: DHR) today
announced that it has made a proposal to Cooper Industries, Inc. (NYSE: CBE) 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 will hold a conference call today at 8:30 a.m. E.S.T. to discuss
this announcement. To participate, please dial 706-679-6107, conference ID #
1511675, approximately 10 minutes prior to the beginning of the call to receive
clearance from the operator. You will be requested to identify yourself and the
organization on whose behalf you are participating. Media will be in a
listen-only mode for the duration of the call. A recording of this call will be
made available beginning at 11:00 a.m. E.S.T. on August 1, 2001 through to 11:00
a.m. E.S.T. on August 8, 2001 by dialing 706-645-9291, conference ID # 1511675.
The conference call will also be available in an audio archive on the Danaher
website (http://www.danaher.com).
Danaher Corporation is a leading manufacturer of Process/Environmental
Controls and Tools and Components. (http://www.danaher.com)
The above press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act. In some cases, you can identify these so-called "forward-looking
statements" by words such as "would," "will," "expects," "plans," "believes" or
words of similar tenor. These forward-looking statements are based on
management's good faith expectations and beliefs concerning future developments,
but you are cautioned that actual events or results may differ materially from
the expectations expressed in such forward-looking statements as a result of
various factors, including risks and uncertainties, many of which are beyond the
control of Danaher. Factors that could cause actual results to differ materially
include the following: (1) the businesses of Danaher and Cooper may not be
integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; (2) expected combination benefits from
the transaction may not be fully realized or may not be realized within the
expected time frame; (3) Cooper may not be able to meet Danaher's expectations
and revenues following the transaction may be lower than expected; (4) operating
costs and business disruption, including difficulties in maintaining
relationships with employees, customers or suppliers, may be greater than
expected following the transaction; (5) the regulatory approvals required for
the transaction may not be obtained on the proposed terms or on the anticipated
schedule; and (6) other risks described from time to time in Danaher's periodic
reports filed with the Securities and Exchange Commission. Danaher disclaims any
duty to update any forward-looking statements, all of which are expressly
qualified by the foregoing.
# # #
FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act. In some cases, you can identify these so-called "forward-looking
statements" by words such as "may," "will," "expects," "plans," "believes,"
"estimates," "predicts," "potential," or words of similar tenor. These
forward-looking statements are based on management's good faith expectations and
beliefs concerning future developments, but you are cautioned that actual events
or results may differ materially from the expectations expressed in such
forward-looking statements as a result of various factors, including risks and
uncertainties, many of which are beyond the control of Danaher Corporation
("Danaher"). Factors that could cause actual results to differ materially
include, but are not limited to: (1) the businesses of Danaher and Cooper
Industries, Inc. ("Cooper") may not be integrated successfully or such
integration may be more difficult, time-consuming or costly than expected; (2)
expected combination benefits from the transaction may not be fully realized or
realized within the expected time frame; (3) Cooper may not be able to meet
Danaher's expectations and revenues following the transaction may be lower than
expected; (4) operating costs and business disruption, including difficulties in
maintaining relationships with employees, customers or suppliers, may be greater
than expected following the transaction; (5) the regulatory approvals required
for the transaction may not be obtained on the proposed terms or on the
anticipated schedule; (6) the effects of legislative and regulatory changes
(particularly environmental regulations) which could affect demand for products
in the Process/Environmental Controls segment; (7) unanticipated developments
that could occur with respect to contingencies such as environmental matters and
litigation; (8) technological changes; (9) changes in labor or capital costs;
(10) Danaher's ability to attract and retain qualified employees; (11) future
acquisitions, strategic partnerships and divestitures; (12) general business and
economic conditions; and (13) other risks described from time to time in
Danaher's periodic reports filed with the Securities and Exchange Commission
(the "SEC"). Danaher disclaims any duty to update any forward-looking
statements, all of which are expressly qualified by the foregoing.
ADDITIONAL INFORMATION
DEPENDING ON FUTURE DEVELOPMENTS, DANAHER MAY FILE WITH THE SEC (1) A PROXY
STATEMENT FOR SOLICITATION OF PROXIES FROM THE SHAREHOLDERS OF COOPER IN
CONNECTION WITH COOPER'S SPECIAL MEETING WHICH IS SCHEDULED TO TAKE PLACE ON
AUGUST 30, 2001, AND/OR (2) A PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS
CONCERNING A TRANSACTION AT A DATE OR DATES SUBSEQUENT HERETO. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ ANY SUCH DOCUMENTS IF AND WHEN THEY BECOME
AVAILABLE. ANY SUCH DOCUMENTS WOULD CONTAIN IMPORTANT INFORMATION. INVESTORS AND
SECURITY HOLDERS WOULD BE ABLE TO OBTAIN A FREE COPY OF SUCH DOCUMENTS, IF AND
WHEN THEY BECOME AVAILABLE, AT THE SEC'S INTERNET SITE (http://www.sec.gov) OR
DIRECTLY FROM DANAHER BY MAKING A REQUEST TO: DANAHER CORPORATION, 2099
PENNSYLVANIA AVENUE, NW, 12TH FLOOR, WASHINGTON, D.C. 20006-1813, ATTENTION:
CORPORATE SECRETARY.
DANAHER AND CERTAIN OTHER PERSONS REFERRED TO BELOW MAY BE DEEMED TO BE
PARTICIPANTS IN THE SOLICITATION OF PROXIES. THE PARTICIPANTS IN ANY SUCH
SOLICITATION MAY INCLUDE CERTAIN DIRECTORS AND EXECUTIVE OFFICERS OF DANAHER.
A DETAILED LIST OF THE NAMES OF DANAHER'S DIRECTORS AND OFFICERS IS CONTAINED
IN DANAHER'S PROXY STATEMENT FOR ITS 2001 ANNUAL MEETING, FILED WITH THE SEC ON
APRIL 3, 2001, WHICH MAY BE OBTAINED WITHOUT CHARGE AT THE SEC'S INTERNET SITE
(http://www.sec.gov) OR BY DIRECTING A REQUEST TO DANAHER AT THE ADDRESS
PROVIDED ABOVE. AS OF THE DATE OF THIS COMMUNICATION, DANAHER DOES NOT OWN ANY
SHARES OF COOPER COMMON STOCK, AND, TO DANAHER'S KNOWLEDGE, NONE OF THE
OFFICERS OR DIRECTORS OF DANAHER WHO WOULD BE EXPECTED TO PARTICIPATE IN ANY
SUCH SOLICITATION OF PROXIES OWNS ANY SHARES OF COOPER COMMON STOCK. EXCEPT AS
DISCLOSED ABOVE AND IN DANAHER'S PROXY STATEMENT FOR ITS 2001 ANNUAL MEETING,
TO THE KNOWLEDGE OF DANAHER, NONE OF THE DIRECTORS OR EXECUTIVE OFFICERS OF
DANAHER WHO WOULD BE EXPECTED TO PARTICIPATE IN ANY SUCH SOLICITATION OF PROXIES
HAS ANY MATERIAL INTEREST, DIRECT OR INDIRECT, BY SECURITY HOLDINGS OR
OTHERWISE, IN DANAHER OR COOPER.