May 9, 1997
Board of Directors
Dynamics Corporation of America
475 Steamboat Road
Greenwich, Connecticut 06830-7197
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the Common Stock, par value $0.10 per
share (the "Shares"), of Dynamics Corporation of America (the "Company") of the
consideration to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of May 9, 1997 (the "Merger Agreement"),
among the Company, CTS Corporation ("CTS") and a wholly owned subsidiary of CTS
("Sub"). The Merger Agreement provides for, among other things, a cash tender
offer by Sub to acquire up to 49.9% of the issued and outstanding Shares at a
price of $55 per Share (the "Tender Offer"), and for a merger of the Company
with and into Sub (the "Merger" and, together with the Tender Offer, the
"Transaction"), pursuant to which each outstanding Share not owned directly or
indirectly by CTS, Sub or the Company will be converted into 0.88 shares of
common stock, without par value, of CTS ("CTS Common Stock"). Pursuant to the
Merger Agreement, the Merger may be consummated, at the election of CTS and Sub,
in certain circumstances if no Shares are purchased in the Tender Offer. The
shares of CTS Common Stock issuable in the Merger and, in the event Shares are
purchased in the Tender Offer, the cash price paid for such shares, are referred
to collectively as the "Consideration".
In connection with rendering our opinion, we have reviewed the Merger
Agreement. We have also reviewed and analyzed certain publicly available
business and financial information relating to the Company and CTS for recent
years and interim periods to date, as well as certain internal financial and
operating information, including financial forecasts, analyses and projections
prepared by or on behalf of the Company and CTS and provided to us for purposes
of our analysis, and we have met with the managements of the Company and CTS to
review and discuss such information and, among other matters, the Company's and
CTS' respective businesses, operations, assets, financial condition and future
prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company and CTS, and we have compared that data with similar
data for certain other companies, the securities of which are publicly traded,
that we believe may be relevant or comparable in certain respects to the Company
and CTS or one or more of their respective businesses or assets, and we have
reviewed and considered the financial terms of certain recent acquisitions and
business combination transactions which we believe to be reasonably comparable
to the
Board of Directors of Dynamics Corporation of America
May 9, 1997
Page 2
Transaction or otherwise relevant to our inquiry. We have also performed such
other studies, analyses, and investigations and reviewed such other information
as we considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also relied upon the reasonableness and accuracy of the
financial projections, forecasts and analyses provided to us and we have
assumed, with your consent, that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's and CTS' management, and we
express no opinion with respect to such projections, forecasts and analyses or
the assumptions upon which they are based. In addition, we have not reviewed
any of the books and records of the Company or CTS, or assumed any
responsibility for conducting a physical inspection of the properties or
facilities of the Company or CTS, or for making or obtaining an independent
valuation or appraisal of the assets or liabilities of the Company or CTS, and
no such independent valuation or appraisal was provided to us. We have assumed
that the transactions described in the Merger Agreement will be consummated on
the terms set forth therein, without material waiver or modification. We have
also assumed that the Merger will qualify as a tax-free reorganization under the
Internal Revenue Code. Our opinion is necessarily based on economic and market
conditions and other circumstances as they exist and can be evaluated by us as
of the date hereof. In rendering this opinion, we are not expressing any
opinion as to the price at which the shares of CTS Common Stock will actually
trade at any time, or the market value of the Consideration that the Company's
shareholders will receive upon consummation of the Transaction.
It should be noted that in the context of our current engagement by the
Company, at the direction of the Company, we have not solicited alternative
offers for the Company or its assets, although we have (with the Company's
permission) engaged in preliminary discussions with one company (other than CTS
and WHX Corporation ("WHX")). Today such company delivered a written proposal
to the Company to acquire all of the outstanding Shares for $54 per Share in
cash, subject to certain conditions, including the negotiation of a mutually
satisfactory merger agreement.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a major portion of which is
contingent upon the consummation of the Transaction.
Our opinion addresses only the fairness from a financial point of view to
the shareholders of the Company of the Consideration to be received by such
shareholders pursuant to the Transaction, and we do not express any views on any
other terms of the Transaction. Specifically, our opinion does not address the
Company's underlying business decision to effect the transactions contemplated
by the Merger Agreement.
Board of Directors of Dynamics Corporation of America
May 9, 1997
Page 3
It is understood that this letter is for the benefit and use of the Board
of Directors of the Company in its consideration of the Transaction, and except
for inclusion in its entirety in the Company's Schedule 14D-9 relating to the
tender offer by WHX for any and all of the Shares, the Company's Schedule 14D-9
relating to the Tender Offer and any proxy statement of the Company relating to
the Merger, may not be quoted, used or reproduced for any other purpose without
our prior written consent. This opinion does not constitute a recommendation to
any shareholder with respect to whether such holder should tender Shares
pursuant to the Tender Offer or as to how such holder should vote with respect
to the Merger, and should not be relied upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof
the Consideration to be received by the shareholders of the Company pursuant to
the Merger Agreement is fair to the shareholders of the Company from a financial
point of view.
Very truly yours,
/s/ WASSERSTEIN PERELLA & CO., INC.
WASSERSTEIN PERELLA & CO., INC.