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EXHIBIT 14
SCHEDULE II
[ADVEST, INC. LOGO]
INVESTMENT BANKING
100 Federal Street
29th Floor
Boston, MA 02210
(617) 423-0003
Fax: (617) 423-7190
ADVEST, INC.
A SUBSIDIARY OF THE ADVEST GROUP, INC.
SERVING INVESTORS SINCE 1898
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October 14, 1999
Board of Directors
Ferrofluidics Corporation
40 Simon Street
Nashua, NH 03061
Members of the Board:
Ferrofluidics Corporation ("Ferrofluidics" or the "Company") and Ferrotec
Corporation ("Ferrotec") are expected to enter into an Agreement and Plan of
Merger (the "Agreement"), whereby a newly created wholly-owned subsidiary of
Ferrotec ("Merger Subsidiary") will offer to purchase all of the issued and
outstanding shares of Ferrofluidics common stock for $6.50 per share (the
"Tender Offer"). Subsequent to the completion of the Tender Offer, Merger
Subsidiary will be merged with and into Ferrotec (the "Merger"), and each
outstanding share of Ferrofluidics common stock that was not acquired in the
Tender Offer will be converted into the right to receive $6.50 in cash. The
Merger and the Tender Offer together comprise the "Transaction." At the
completion of the Transaction, Ferrofluidics will be a wholly-owned subsidiary
of Ferrotec.
You have asked us, Advest, Inc. ("Advest"), whether, in our opinion, the
cash consideration to be received by Ferrofluidics shareholders is fair, from a
financial point of view, to the Company and its shareholders.
Advest, as part of its investment banking business is regularly engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, private placements of equity and debt and negotiated
underwritings.
In arriving at our opinion set forth below, we have, among other things,
reviewed:
i) the draft Agreement and Plan of Merger with comments dated October
12, 1999;
ii) the Company's Forms 10-K for the years 1996 through 1999 and the
Company's Forms 10-Q for the quarters ended December 26, 1998 and
March 27, 1999;
iii) comparative financial and operating data for companies identified
as similar to Ferrofluidics;
iv) the pricing and financial terms of business acquisitions recently
effected involving companies similar to Ferrofluidics;
v) operating projections for Ferrofluidics prepared by senior
management;
Member: New York, American and Other Principal Stock Exchanges. Member: SIPC
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[ADVEST, INC. LOGO]
Board of Directors -2- October 14, 1999
vi) the financial condition, businesses, and prospects of the Company
through discussions with members of senior management of
Ferrofluidics; and
vii) such other financial studies and analyses as we deemed necessary.
We have, among other things, performed the following analyses and
investigations: (i) we compared the proposed purchase price per share to the
trading range of Ferrofluidics' common stock; (ii) we compared the proposed
purchase price and its implied ratios to sales, earnings, book value and cash
flow ("multiples") to the same multiples calculated from current public market
valuations of publicly traded companies deemed similar to the Company; (iii) we
compared the proposed purchase price and its implied multiples of sales and cash
flow to the same multiples as calculated from valuations established in recent
transactions of companies deemed similar to the Company; (iv) we analyzed and
compared the proposed purchase price to the value of estimated future free cash
flows discounted to their current value; and (v) we analyzed Ferrofluidics'
historical trading activity, including volume and price relationships. In
addition, we performed such other analysis and investigations and took into
account such other matters and information as we deemed necessary.
Advest has provided certain investment banking services to Ferrofluidics in
the past and has received fees for rendering these services. As part of this
engagement, the Company has agreed to pay Advest a fee for delivery of this
opinion letter.
In preparing this opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company,
and we have not independently verified such information, nor have we undertaken
an independent appraisal of the assets or liabilities of the Company. This
opinion is necessarily based upon circumstances and conditions as they exist and
can be evaluated by us as of the date of this letter. Our opinion is directed to
the Board of Directors of Ferrofluidics and does not constitute a recommendation
of any kind to any shareholder of Ferrofluidics as to whether such shareholder
should tender his or her stock in the Tender Offer or how such shareholder
should vote at the shareholders' meeting to be held in connection with the
Merger. We have assumed for purposes of this opinion that there have been no
material changes in the financial condition of the Company from the conditions
disclosed in the Company's financial reports.
Advest will consent to a description and inclusion of this opinion in
documents issued with regard to this transaction and to references to Advest in
such documents, provided that any such description and references are reasonably
acceptable to Advest. Except as otherwise provided above, this opinion is solely
for the use and benefit of the Company and shall not be disclosed publicly or
made available to third parties without the prior approval of Advest, which
approval shall not be unreasonably withheld.
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[ADVEST, INC. LOGO]
Board of Directors -3- October 14, 1999
In reliance upon and subject to the foregoing, it is our opinion that, as
of the date hereof, the cash consideration of $6.50 per share to be received by
the Company's shareholders in the Transaction is fair, from a financial point of
view, to the Company and its shareholders.
Very truly yours,
ADVEST, INC.
/s/ Rex H. Green
By: Rex H. Green
Managing Director
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