EXHIBIT J
The Board of Directors
June 17, 1996
CONFIDENTIAL
Brenco, Incorporated
One Park West Circle
Midlothian, VA 23113
Members of the Board:
You have requested our opinion as to the fairness, from a finan-cial point
of view, to the holders of the outstanding shares of Common Stock, par value
$1.00 per share (the "Shares"), of Brenco, Incorporated (the "Company") of the
cash consideration of $16.125 per Share to be received by such holders pursuant
to the Acquisition Agreement dated as of June 15, 1996, among Varlen Corporation
(the "Acquiror"), BAS, Inc. and the Company (the "Agreement").
Wheat, First Securities, Inc. ("Wheat"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. Wheat has provided investment banking services for the Company
in the past for which it has received customary compensation. In the ordinary
course of our business as a broker-dealer, we may, from time to time, have a
long or short position in, and buy or sell, debt or equity securities of the
Company or the Acquiror for our own account or for the accounts of our
customers. Wheat will receive a fee from the Company for rendering this opinion.
In arriving at our opinion, we have, among other things:
(1) reviewed the financial and other information contained in the Company's
Annual Reports to Shareholders and Annual Reports on Form 10-K for the
fiscal years ended December 31, 1995, December 31, 1994 and December 31,
1993, and certain interim reports to Shareholders and Quarterly Reports
on Form 10-Q;
(2) conducted discussions with members of senior management of the Company
concerning the Companys business and prospects;
(3) reviewed certain publicly available information with respect to
historical market prices and trading activity for the Company's Common
Stock and for certain publicly traded companies which we deemed relevant;
(4) compared the results of operations of the Company with those of certain
publicly traded companies which we deemed relevant;
(5) compared the proposed financial terms of the transaction with the
financial terms of certain other mergers and acquisitions which we deemed
to be relevant;
(6) performed a discounted cash flow analysis of the Company based upon
estimates of projected financial performance prepared by the management
of the Company;
(7) reviewed the Agreement (including the Exhibits thereto) dated June 15,
1996; and
(8) reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all information supplied or otherwise made available to us by
the Acquiror and the Company, and we have not assumed any responsibility for
independent verification of such information or any independent valuation or
appraisal of any of the assets of the Acquiror and the Company. We have relied
upon the management of the Acquiror and the Company as to the reasonableness and
achievability of their financial and operational forecasts and projections, and
the assumptions and bases therefor, provided to us, and we have assumed that
such forecasts and projections reflect the best currently available estimates
and judgments of such management and that such forecasts and projections will be
realized in the amounts and in the time periods currently estimated by such
management. Our opinion is necessarily based upon market, economic and other
conditions as they exist and can be evaluated on the date hereof and the
information made available to us through the date hereof. Our opinion does not
address the relative merits of the transaction contemplated by the Agreement as
compared to any alternative business strategies that might exist for the
Company, nor does it address the effect of any other business combination in
which the Company might engage.
Our advisory services and the opinion expressed herein are provided solely
for the use of the Company's Board of Directors in evaluating the transaction
contemplated by the Agreement and are not on behalf of, and are not intended to
confer rights or remedies upon the Acquiror, any stockholder of the Acquiror or
the Company, or any person other than the Company's Board of Directors. This
opinion may not be summarized, excerpted from or otherwise publicly referred to
without our prior written consent.
On the basis of, and subject to the foregoing, we are of the opinion that as
of the date hereof the cash consideration of $16.125 per Share to be received by
the holders of the Shares is fair, from a financial point of view, to such
holders.
Very truly yours,
WHEAT, FIRST SECURITIES, INC.
By: __________________________________
Managing Director