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January 29, 2000
Board of Directors
Thermo Electron Corporation
81 Wyman Street
Post Office Box 9046
Waltham, MA 02454-0946
Attention: Dr. Richard Syron
Chairman and Chief Executive Officer
Board of Directors
Thermedics Inc.
470 Wildwood Street
Woburn, MA 01888
Attention: Mr. John Keiser
President and Chief Executive Officer
Ladies and Gentlemen:
J.P. Morgan Securities Inc. ("J.P. Morgan") and The Beacon Group Capital
Services, LLC (collectively "we", "us" and "our") understand that Thermedics
Inc. ("Thermedics"), a subsidiary of Thermo Electron Corporation ("Thermo
Electron"), proposes to acquire all of the outstanding common stock, par value
$.10 per share, (the "Shares") of Thermedics Detection Inc. (the "Company") not
currently held by Thermo Electron or its subsidiaries from the holders thereof
at a purchase price of $8.00 per Share, net to the seller in cash (the
"Consideration"), pursuant to (i) an offer (the "Offer") by Detection
Acquisition, Inc. (the "Purchaser"), an indirect wholly-owned subsidiary of
Thermedics, to purchase all of the outstanding Shares and (ii) the subsequent
merger (the "Merger") of the Purchaser with and into the Company. You have
requested our joint opinion as to the fairness, from a financial point of view,
to Thermedics and to Thermo Electron of the Consideration proposed to be paid
pursuant to the Offer and the Merger.
In arriving at our opinion, we have reviewed (i) certain publicly available
information concerning the business of the Company and of certain other
companies engaged in businesses deemed to be comparable to those of the Company;
(ii) the reported market prices of the securities of certain other companies
deemed by us to be comparable to the Company; (iii) publicly available terms of
certain transactions involving companies deemed by us to be comparable to the
Company and the consideration paid for such companies; (iv)
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current and historical market prices of the Shares; (v) the audited financial
statements of Thermedics, Thermo Electron and the Company for the fiscal year
ended January 2, 1999 and the unaudited financial statements of Thermedics,
Thermo Electron and the Company for the period ended October 2, 1999; (vi)
certain agreements with respect to outstanding indebtedness or obligations of
Thermedics, Thermo Electron and the Company; (vii) the terms of other business
combinations that we deemed relevant; and (viii) projections for the period from
October 3, 1999 through January 1, 2000 and for fiscal 2000 prepared by the
Company in November 1999 (the "2000 Projections").
In addition, we have held discussions with certain members of the managements of
Thermedics and Thermo Electron with respect to certain aspects of the Offer and
the Merger, the past and current business operations of the Company, the
financial condition and future prospects and operations of the Company and
certain other matters we believed necessary or appropriate to our inquiry. We
did not hold any discussions with the management of the Company. We have
reviewed such other financial studies and analyses and considered such other
information as we deemed appropriate for the purposes of this opinion. However,
the 2000 Projections were the only information prepared by the Company which we
reviewed.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to, or discussed with, us, by Thermedics, Thermo
Electron or the Company or was otherwise reviewed by us, and we have not assumed
any responsibility or liability therefor. We have also assumed that there have
been no material changes in the Company's financial condition, results of
operations, business or prospects since the date of the most recent financial
statements made available to us. We have not conducted, and we have not assumed
any responsibility for conducting, any valuation, appraisal or physical
inspection of any assets or liabilities (contingent or otherwise), nor have any
such valuations or appraisals been provided to us. In relying on the financial
analyses, projections and estimates provided to, or discussed with, us, we have
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management as to the
expected future financial performance of the Company. We have relied as to all
legal matters relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect the conclusions in
this opinion and that we do not have any obligation to update, revise or
reaffirm this opinion.
We have acted as financial advisors to Thermedics and Thermo Electron with
respect to the proposed Offer and Merger and will receive a fee from Thermo
Electron for our services. We have also acted as financial advisors to Thermo
Electron for the purpose of advising Thermo Electron in connection with its
strategic alternatives, including the proposed reorganization of Thermo Electron
and its subsidiaries. As part of the proposed reorganization of Thermo Electron,
it is contemplated that Thermo Electron will acquire the
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publicly-held minority interest in Thermedics. We will receive separate fees for
services with respect to other elements of Thermo Electron's reorganization,
including acting as financial advisors to Thermo Electron in connection with the
acquisition of the publicly-held minority interest in Thermedics. These other
fees include a minimum retainer for each of us and additional compensation if
some or all of the other elements of Thermo Electron's reorganization are
completed. In the ordinary course of their businesses, J.P. Morgan and its
affiliates may actively trade the debt and equity securities of Thermedics,
Thermo Electron or the Company and their affiliates for their own account or for
the accounts of customers and, accordingly, they may at any time hold long or
short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date
hereof that the Consideration to be paid pursuant to the Offer and the Merger is
fair, from a financial point of view, to Thermedics and to Thermo Electron.
This letter is provided to the Boards of Directors of Thermedics and Thermo
Electron in connection with and for the purposes of their evaluation of the
Offer and the Merger. This opinion does not constitute a recommendation to any
stockholder of the Company as to whether such stockholder should tender its
Shares in the Offer. This opinion may not be disclosed, referred to, or
communicated (in whole or in part) to any third party for any purpose whatsoever
except with our prior written consent in each instance. We hereby consent to the
filing of this opinion as an exhibit to the Tender Offer Statement on Schedule
TO to be filed by Thermedics, Thermo Electron and certain of their subsidiaries
and to the provision of this opinion to persons who request it as contemplated
by the Schedule TO.
Very truly yours,
J.P. MORGAN SECURITIES INC.
/s/ J.P. Morgan Securities Inc.
THE BEACON GROUP CAPITAL SERVICES, LLC
/s/ The Beacon Group Capital Services, LLC