MORGAN STANLEY
MORGAN STANLEY & CO.
INCORPORATED
ONE FINANCIAL PLACE
440 SOUTH LA SALLE STREET
CHICAGO, IL 60605
(312) 706-4000
April 9, 1997
Board of Directors
Stant Corporation
425 Commerce Drive
Richmond, IN 47374
Members of the Board:
We understand that Stant Corporation ("Target" or the "Company"), Tomkins
Corporation ("Buyer") and E&W Acquisition Corp., a wholly owned subsidiary
of Buyer ("Acquisition Sub"), have entered into an Agreement and Plan of
Merger, dated as of April 9, 1997, (the "Merger Agreement"), which provides,
among other things, for (i) the commencement by Acquisition Sub of a tender
offer (the "Tender Offer") for all outstanding shares of common stock, par
value $.01 per share (the "Common Stock"), of Target for $21.50 per share net
to the seller in cash, and (ii) the subsequent merger (the "Merger") of
Acquisition Sub with and into Target. Pursuant to the Merger, Target will
become a wholly owned subsidiary of Buyer and each outstanding share of Common
Stock other than shares held in treasury or held by Buyer or any affiliate of
Buyer or as to which dissenters' rights have been perfected, will be converted
into the right to receive $21.50 per share in cash. The terms and conditions
of the Tender Offer and the Merger are more fully set forth in the Merger
Agreement.
We further understand that approximately 57% of the outstanding shares of
Common Stock are owned by Bessemer Capital Partners, L.P ("BCP") and that
concurrently with the execution and delivery of the Merger Agreement, Buyer,
Acquisition Sub and BCP have entered into a Stockholder Agreement dated as of
April 9, 1997 (the "Stockholder Agreement") pursuant to which BCP agrees to
take certain actions to support the transactions contemplated by the Merger
Agreement.
You have asked for our opinion as to whether the consideration to be received
by the holders of shares of Common Stock pursuant to the Merger Agreement is
fair from a financial point of view to such holders.
MORGAN STANLEY
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements
and other information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company
prepared by the management of the Company;
(iii) reviewed certain financial projections prepared by the
management of the Company;
(iv) discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
(v) reviewed the reported prices and trading activity for the
Common Stock;
(vi) compared the financial performance of the Company and the
prices and trading activity of the Common Stock with that
of certain other comparable publicly-traded companies and
their securities;
(vii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
(viii) reviewed the Merger Agreement, dated April 9, 1997, the
Stockholder Agreement, dated April 9, 1997 and certain
related documents; and
(ix) performed such other analyses as we have deemed appropriate
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company. We
have not made any independent valuation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such
appraisals. 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.
We have been engaged to provide this opinion to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services. In the past, Morgan Stanley & Co. Incorporated and its affiliates
have provided financial advisory and financing services for the Company and
BCP and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its
entirety in any filing by the Company with the Securities and Exchange
Commission in connection with the Tender Offer and Merger. In addition, Morgan
Stanley expresses no opinion or recommendation as to whether holders of Common
Stock should accept the Tender Offer.
MORGAN STANLEY
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair from a financial point of view to such
holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ T. Sands Thompson
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T. Sands Thompson
Vice President