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Exhibit 7
[Fleet Logo]
Fleet Securities, Inc.
100 Federal Street
Boston, MA 02110
December 10, 2000
Board of Directors
Detection Systems, Inc.
130 Perinton Parkway
Fairport, NY 14450-9199
Members of the Board:
We understand that Detection Systems, Inc. (the "Company"), Robert Bosch GmbH
("Parent") and a subsidiary to be formed (a wholly owned subsidiary of
Parent, "Purchaser") are proposing to enter into an Agreement and Plan of
Merger (the "Agreement") which will provide, among other things, for the
Offer and the Merger (as such terms are defined below). Under the terms, and
subject to the conditions, set forth in a draft of the Agreement dated
December 10, 2000 (the "Draft Agreement"), (i) Purchaser will commence a
tender offer (the "Offer") to purchase all of the outstanding shares of
common stock of the Company, par value $.05 per share ("Company Common
Stock"), at a price equal to $18.00 per share net to the seller in cash, and
(ii) following the Offer, Purchaser will be merged with and into the Company
(the "Merger"). Pursuant to the Merger, the Company will become a wholly
owned subsidiary of Parent and each share of Company Common Stock (other than
shares of Company Common Stock held in treasury or owned by Parent or
Purchaser or any of their respective subsidiaries) shall be converted into
the right to receive $18.00 in cash (or any higher price paid for a share of
Company Common Stock in the Offer), without interest. The terms and
conditions of the Offer and the Merger are set out more fully in the
Agreement.
You have asked us whether, in our opinion, the cash consideration to be paid
to the "Holders of Company Common Stock" in the Offer and the Merger is fair
from a financial point of view and as of the date hereof to the Holders of
Company Common Stock. As used herein, the "Holders of Company Common Stock"
shall mean all holders of Company Common Stock other than Parent, Purchaser,
or any affiliates of Parent or Purchaser.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and
other business and financial information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by
the Company's management;
(iii) reviewed certain financial forecasts and other forward looking
financial information prepared by the Company's management;
(iv) held discussions with the management of the Company concerning
the business, past and current operations, financial condition
and future prospects of the Company;
(v) reviewed the financial terms and conditions set forth in the
Draft Agreement;
(vi) reviewed the stock price and trading history of the Company;
A FLEETBOSTON FINANCIAL COMPANY
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(vii) compared the financial performance of the Company and the prices
and trading activity of Company Common Stock with that of certain
other publicly traded companies comparable with the Company;
(viii) compared the financial terms of the Offer and the Merger with the
financial terms, to the extent publicly available, of other
transactions that we deemed relevant;
(ix) considered the equity premiums paid, to the extent publicly
available, in other transactions that we deemed relevant;
(x) prepared a discounted cash flow analysis of the Company;
(xi) prepared a leveraged buyout analysis of the Company;
(xii) participated in discussions and negotiations among
representatives of the Company and Parent and their financial and
legal advisors; and
(xiii) made such other studies and inquiries, and reviewed such other
data, as we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and
other information provided to us (including information furnished to us
orally or otherwise discussed with us by the Company's management) or
publicly available and we have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon
the assurances of the Company's management that it is not aware of any facts
that would make such information inaccurate or misleading. Furthermore, we
did not obtain or make, or assume any responsibility for obtaining or making,
any independent evaluation or appraisal of the properties, assets or
liabilities (contingent or otherwise) of the Company, nor were we furnished
with any such evaluation or appraisal. With respect to the financial
forecasts and projections (and the assumptions and bases therefor) for the
Company that we have reviewed, upon the advice of the Company's management,
we have assumed that such forecasts and projections have been reasonably
prepared in good faith on the basis of reasonable assumptions and reflect the
best currently available estimates and judgments as to the future financial
condition and performance of the Company, and we have further assumed that
such projections and forecasts will be realized in the amounts and in the
time periods currently estimated. We have assumed that the Offer and the
Merger will be consummated upon the terms set forth in the Draft Agreement
without material alteration thereof or the waiver of any condition thereof.
In addition, we have assumed that the historical financial statements of the
Company reviewed by us have been prepared and fairly presented in accordance
with U.S. generally accepted accounting principles consistently applied. We
have relied as to all legal matters relevant to rendering our opinion on the
advice of counsel.
This opinion is necessarily based upon market, economic and other conditions
as in effect on, and information made available to us as of, the date hereof.
It should be understood that subsequent developments may affect the
conclusion expressed in this opinion and that we disclaim any undertaking or
obligation to advise any person of any change in any matter affecting this
opinion which may come or be brought to our attention after the date of this
opinion. Our opinion is limited to the fairness, from a financial point of
view and as of the date hereof, to the Holders of Company Common Stock of the
cash consideration to be paid in the Offer and the Merger. We do not express
any opinion as to (i) the value of any employee agreement or other
arrangement entered into in connection with the Offer and the Merger or (ii)
any tax or other consequences that might result from the Offer and the
Merger. Our opinion does not address the relative merits of the Offer and the
Merger and the other business strategies that the Company's Board of
Directors has considered or may be considering, nor does it address the
decision of the Company's Board of Directors to proceed with the Offer and
the Merger.
We are acting as financial advisor to the Company in connection with the
Offer and the Merger and will receive (i) a fee contingent upon the delivery
of this opinion and (ii) an additional fee contingent upon the consummation
of the Offer and the Merger. In addition, the Company has agreed to indemnify
us for certain liabilities that may arise out of our engagement. Fleet
National Bank, one of our affiliates,
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currently provides senior debt financing and other commercial banking
services to the Company. In the ordinary course of business, we or one of our
affiliates may trade in the Company's securities for our own account and the
account of our customers and, accordingly, may at any time hold a long or
short position in the Company's securities.
Our opinion expressed herein is provided for the information of the Board of
Directors of the Company in connection with its evaluation of the Offer and
the Merger. Our opinion is not intended to be and does not constitute a
recommendation to any shareholder of the Company whether or not to tender
his/her shares of Company Common Stock in the Offer or, if required, how to
vote, or whether or not to take any action, with respect to the Offer and the
Merger. This opinion may not be summarized, described or referred to or
furnished to any party except with our express prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the cash consideration to be paid in the Offer
and the Merger is fair to the Holders of Company Common Stock from a
financial point of view.
Very truly yours,
FLEET SECURITIES, INC.
/s/ Fleet Securities, Inc.
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