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Previous: PARKER HANNIFIN CORP, 425, 2000-03-14 |
Next: SPARTECH CORP, 8-K, 2000-03-14 |
<PAGE> 1
Filed by Parker-Hannifin Corporation
Pursuant to Rule 425 under the
Securities Act of 1933
Subject Company: Parker-Hannifin Corporation
Commission File No: 1-4982
SLIDES USED IN CONNECTION WITH COMMERCIAL INTERTECH EMPLOYEE AND SHAREHOLDER
PRESENTATIONS MADE BY PARKER IN CONNECTION WITH ITS PROPOSED MERGER WITH
COMMERCIAL INTERTECH:
1
<PAGE> 2
A Match-Up Made
To Move the World's Industries
[LOGO] PH [LOGO] Commercial [LOGO] Parker
NYSE Intertech
2
<PAGE> 3
Today's Agenda
- Merger Update
- Review of Terms
- Our Synergies Together
- Getting to Know Parker
- What the Experts Say
[LOGO] Commercial [LOGO] Parker
Intertech
3
<PAGE> 4
Merger Update
- YOU SHOULD HAVE RECEIVED THE PROXY
statement/prospectus mailed on March 2
- CLEARANCE TO PROCEED RECEIVED from the Federal
Trade Commission and the U.S. Securities
Exchange Commission
- INFORMATIONAL MEETINGS held in Boston, Cleveland,
New York, San Francisco & Youngstown
- APRIL 11 MEETING to officially record and report
results; votes are tabulated as they are received
[LOGO] Commercial [LOGO] Parker
Intertech
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<PAGE> 5
Merger Update
- Preliminary integration planning under way
- Joint teams established, equal representation of
Commercial and Parker managers
- Developing plans to coordinate sales, purchasing,
information systems, financial reporting, etc.
- The vast majority of jobs at the headquarters
support the operating units and will be retained
- Placement of duplicating corporate staff members
is our top priority
- Conducting meetings with these individuals
to explore opportunities
[LOGO] Commercial [LOGO] Parker
Intertech
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<PAGE> 6
Merger Update
- Integration planning confirms what we knew
- Commercial people are terrific; we're looking
forward to welcoming them to the Parker family
- Commercial operating units will continue to
operate as locally managed businesses
- Commercial business unit managers will be given
greater P&L responsibility under Parker
[LOGO] Commercial [LOGO] Parker
Intertech
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<PAGE> 7
Merger Update
- Integration planning confirms what we knew
- Very little overlap; the products and plants are key
to our business going forward
- No plans to disrupt Commercial operations
- We don't have duplicating plants
- We need the people and the capacity
- We'll improve the operations together
- We're ready to grow the business; Parker has the
financial capacity to invest in growth
[LOGO] Commercial [LOGO] Parker
Intertech
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<PAGE> 8
Merger Update
- WE ARE ALREADY MAKING GOOD ON OUR COMMITMENT TO GROW
COMMERCIAL INTERTECH with our recent acquisition of Dana's
Gresen Hydraulics
GRESEN -- Another great fit for Parker &
Commercial to offer system
solutions in mobile hydraulics
[LOGO] Commercial [LOGO] Parker
Intertech
8
<PAGE> 9
Merger Update
- The pension plan is fully funded & Parker
absolutely will continue retirement benefits
- All employee benefits remain in place
- The 401k plan stays too
- We invest in employee development
- Parker reimburses 100% of education costs for job
enrichment, including training & degree programs
- We offer relocation to employees and their
families when new opportunities require moving
[LOGO] Commercial [LOGO] Parker
Intertech
9
<PAGE> 10
Merger Update
- We'll continue to invest in this community, as
we do in our many other hometowns
- Parker supports the arts, community development,
education, public health and a spectrum of
charitable causes
- We invest in what's important locally: we've
established an advisory board to guide our
giving in the Mahoning Valley
- We encourage all local managers to dedicate time
to active community leadership
[LOGO] Commercial [LOGO] Parker
Intertech
10
<PAGE> 11
Review of Terms
- $20 per share cash or conversion to PH stock
- OVERALL TRANSACTION: Parker to pay 51% in
stock, total cash payment capped at 49%
- You may request all cash, all stock or a
combination of cash & stock
- If aggregate cash requests exceed 49% in value,
everyone electing cash will receive a prorated amount
of cash under the cap, with the remaining amount in
PH stock
[LOGO] Commercial [LOGO] Parker
Intertech
11
<PAGE> 12
Review of Terms
- Ratio to convert TEC shares to PH common
stock determined by PH 20-day average closing price
- A collar is customarily established to protect both
companies' shareholders
- Collar fixed values: $43.375< >$53.375
- @ 20-day PH price less than $43.375, the fixed ratio
= .4611 shares of PH for each share of TEC
- @ 20-day PH price greater than $53.375, the fixed
ratio = .3747 shares of PH for each share of TEC
[LOGO] Commercial [LOGO] Parker
Intertech
12
<PAGE> 13
Recent Stock Trend
- Jan. 13 - March 13, 2000
[Graph showing daily stock price and volume of Parker
stock for the period January 13 - March 13, 2000]
[LOGO] Commercial [LOGO] Parker
Intertech
13
<PAGE> 14
Know Your Tax Implications
- Exchange of TEC shares for cash are taxable
as income
- Conversion of TEC to PH shares are tax-deferred
under federal income guidelines
- If you elect all stock, only the nominal amount of
cash paid in lieu of fractional shares is taxable
- Consult your tax advisor
[LOGO] Commercial [LOGO] Parker
Intertech
14
<PAGE> 15
Getting to Know Parker
- Total Return = Stock Appreciation + Dividends
PH in the past five years IN $ %
------- -----
Stock Appreciation 31.09 +153.8
Dividend Increase .19 + 41.3
Total Return $31.28 per share
[LOGO] Commercial [LOGO] Parker
Intertech
15
<PAGE> 16
Synergies = Value + Growth
- Immediate integration synergies
- Purchasing leverage
- Combined information systems
- R&D coordination/rationalization
- Lower SG&A
- Reduced corporate & public company expenses
[LOGO] Commercial [LOGO] Parker
Intertech
16
<PAGE> 17
Synergies = Value + Growth
- Further integration synergies
- Low-cost manufacturing
- Global expansion
- Product rationalization
- Expanded distributor network
- Total system solutions
- Cross-selling extension
[LOGO] Commercial [LOGO] Parker
Intertech
17
<PAGE> 18
Synergies = Value + Growth
- $15 - 20 million annual savings with TEC,
majority in first full fiscal year (FY2001)
- TEC expected to be 10-15(cent)accretive in FY'01
- Gresen expected to be 3-5(cent)accretive in FY'01
- $120 million TEC tax-loss carry-forwards in
future years
- WE ONLY COUNT WHAT WE KNOW: cross-selling,
leverage, other gains not included
[LOGO] Commercial [LOGO] Parker
Intertech
18
<PAGE> 19
Gresen & TEC Strategic Fit
- Customers very favorable
- Complimentary expansion of all 3 portfolios
- Great cultural fit
- Critical mass & unique systems capability to
win new business
- No better strategic fit in this market
- Real value creation for customers, employees
& shareholders
[LOGO] Commercial [LOGO] Parker
Intertech
19
<PAGE> 20
Getting to Know Parker
- Our Foundation & History
- Our Culture
- Our Performance
[LOGO] Commercial [LOGO] Parker
Intertech
20
<PAGE> 21
Parker's Foundation
- 1918: Arthur Parker
[Photograph of Arthur Parker] founds the Parker
Appliance Company
"Our success is
founded on fair
dealing, hard work,
coordination of
effort and quality
of products."
[LOGO] Commercial [LOGO] Parker
Intertech
21
<PAGE> 22
Parker's Foundation
- 1924: After his
[Photograph of inventory was lost
The Parker Appliance Co.] when his truck went
over a cliff, Parker
begins anew, fueled
by the auto industry
boom of the 1920s
[LOGO] Commercial [LOGO] Parker
Intertech
22
<PAGE> 23
Parker's History
- 1930-40: Parker
[Photograph of endures through the
Parker's former headquarters] Great Depression
and establishes new
headquarters with
purchase of
bankrupt Hupp
Motor Car Facility
- Parker's enterprise
employs 38 people
[LOGO] Commercial [LOGO] Parker
Intertech
23
<PAGE> 24
Parker's History
- 1940-45: Parker
[Photograph of answers the call to
crowd of people in front of various aircraft] national defense as
a contract supplier
of hydraulics,
connectors and
metering devices for
aircraft in WWII
- The company is
5,000 employees
strong
[LOGO] Commercial [LOGO] Parker
Intertech
24
<PAGE> 25
Parker's History
- 1945-50: After
[Photograph of Arthur's death,
man and woman] advisors recommend
liquidation to Mrs.
Helen Parker. She
refuses, as son
Patrick is poised to
advance in the
company upon
graduating Harvard
Business School
[LOGO] Commercial [LOGO] Parker
Intertech
25
<PAGE> 26
Parker's History
- 1950-70: The
[Photograph of company grows,
two executives with caption: merges with
New Era in Fluid Power Sparks Hannifin.
Parker-Hannifin Merger]
[LOGO] Commercial [LOGO] Parker
Intertech
26
<PAGE> 27
Parker's History
- Parker is essential to
[Photograph of Apollo 11's historic
Apollo 11 landing on the moon] landing. Upon man's
first touchdown on
the moon, Astronaut
Harrison Schmidt
commands, "Cycle
that Parker valve."
[LOGO] Commercial [LOGO] Parker
Intertech
27
<PAGE> 28
Parker's History
- 1970-90: Parker
[Photograph of airplane] expands to offer a wide
variety of motion and
control products, with a
series of industrial and
aerospace acquisitions
- Commercial
aerospace booms
- 1980 sales reach
$1 billion
[LOGO] Commercial [LOGO] Parker
Intertech
28
<PAGE> 29
Parker Today
- 1990-present: Parker
[Photograph of grows to become
Parker's headquarters] 40,000 employees
strong, with more than
200 manufacturing sites
around the world and a
modern new home in
Cleveland
[LOGO] Commercial [LOGO] Parker
Intertech
29
<PAGE> 30
Parker's Culture
- Decentralized
- Entrepreneurial
- Located in small towns
- People-Oriented
- Close to customer
[Graph showing sales per average employee with
graphic of three Parker employees in background]
1995 approximately $117
1996 approximately $119
1997 approximately $125
1998 approximately $127
1999 approximately $129
(dollars in thousands)
Parker employees are our greatest strength. In 5
years they've doubled sales.
[LOGO] Commercial [LOGO] Parker
Intertech
30
<PAGE> 31
Parker Path to Profitable Growth
[Graphic with overlapping circles]
[Top Circle]
Acquisitions/JVs
[Middle Circle]
FOCUSED OBJECTIVES
- Premier customer service
- Financial Performance
- Profitable Growth
[Bottom Left Circle] [Bottom Right Circle]
Internal Global
growth expansion
[LOGO] Commercial [LOGO] Parker
Intertech
31
<PAGE> 32
Performance Exceeds Objectives
- Over the last 5 years: doubled sales,
quadrupled earnings
Five-Year Compound
Sales Growth
*Goal 7.5%
[Bar graph showing percentage of sales growth by
year:
1995 approximately 6.0%
1996 approximately 7.7%
1997 approximately 12.0%
1998 approximately 13.5%
1999 approximately 14.0%]
Return
on Sales
*Goal 6.0%
[Bar graph showing percentage of return on sales by
year:
1995 approximately 7.0%
1996 approximately 6.9%
1997 approximately 6.9%
1998 approximately 7.1%
1999 approximately 6.2%]
Return on
Average Equity
*Goal 14.0%
[Bar graph showing percentage of return on average
equity by year:
1995 approximately 20.1%
1996 approximately 19.0%
1997 approximately 19.0%
1998 approximately 20.0%
1999 approximately 18.0%]
[LOGO] Commercial [LOGO] Parker
Intertech
32
<PAGE> 33
We Have Financial Capacity
* Post-deal credit ratings remain A and A-1
* Currently > $600 million of unused credit lines
* Debt-to-total capitalization ratio 31% versus new 34-37% goal
* Cash from operations around 10% of sales
[LOGO] Commercial [LOGO] Parker
Intertech
33
<PAGE> 34
Generating Cash on Record Pace
[BAR CHART]
[Vertical Axis = Numerals 0 to 600 in Increments of 100] [Horizontal
Axis = Numerals 94 - 99 and 2K in Increments of 1]
[94 = $259] [95=$240] [96=$338] [97=$392] [98=$321] [99=$459]
[2K=Est. $563]
[LOGO] Commercial [LOGO] Parker
Intertech
34
<PAGE> 35
Consistent Dividend Growth
44 consecutive years of dividend increases
[Graph showing dividends of Parker over 44 year period. Horizontal Axis - Years
from 1957-1999 in increments of three. Vertical Axis - Amounts from .000 to .600
in increments of .150]
[LOGO] Commercial [LOGO] Parker
Intertech
<PAGE> 36
Weighing in the Right Group
- 12-Month P/E Diversified Industrials: 23.8
- 12-Month P/E Heavy Machinery: 15.9
- Parker listed as DIVERSIFIED INDUSTRIAL by:
- S&P, Dow Jones, FTSE, NYSE
- Financial media
[LOGO] Commercial [LOGO] Parker
Intertech
35
<PAGE> 37
How We Match Up
* 3 years
[LINE GRAPH][HORIZONTAL AXIS- MONTHS DEPICTED BY ONE-LETTER
ABBREVIATIONS OVER THREE YEARS BEGINNING WITH MARCH, 1997.
VERTICAL AXIS - PERCENTAGES FROM -20% THROUGH +80% IN
INCREMENTS OF 10. THREE LINES RUN ACROSS THE GRAPH, ONE DEPICTS
MACHINERY("MAC"), ONE DEPICTS INDUSTRIAL DIVERSIFIED ("IDD") AND
ONE DEPICTS PARKER HANNIFIN ("PH"). THE FOLLOWING TABLES SHOW
THE APPROXIMATE PLOTS DEPICTED BY THE CHART BY MONTH]
<TABLE>
<CAPTION>
1997
MONTH PH MAC IDD
<S> <C> <C> <C>
M 3 4 2
A 1 0 -2
M 16 16 5
J 25 23 10
J 45 35 21
A 48 34 29
S 50 30 22
O 70 35 25
N 42 18 24
D 52 23 22
1998
MONTH PH MAC IDD
J 52 11 22
F 54 22 27
M 64 29 35
A 70 32 42
M 51 29 43
J 35 19 38
J 20 16 41
A 11 -2 30
</TABLE>
36
<PAGE> 38
<TABLE>
<CAPTION>
MONTH PH MAC IDD
<S> <C> <C> <C>
S -1 -16 12
O 4 -17 8
N 27 -8 30
D 10 -17 37
1999
MONTH PH MAC IDD
J 15 -7 41
F 22 -17 39
M 25 -16 41
A 30 -2 41
M 68 15 62
J 62 10 71
J 56 11 79
A 57 9 72
S 55 9 78
O 62 9 75
N 53 8 55
D 63 -1 42
2000
MONTH PH MAC IDD
J 78 10 47
F 32 -21 34
</TABLE>
[LOGO] Commercial [LOGO] Parker
Intertech
37
<PAGE> 39
THE WALL STREET JOURNAL THURSDAY, FEBRUARY 24, 2000
[TABLE] Industrial Diversified As of 12/31/99
[NOTE: OVERLAPPING BOX OBSCURES SOME FIGURES FROM TABLE. A NUMBER
SIGN (#) IS USED TO INDICATE AN OBSCURED FIGURE.]
<TABLE>
<CAPTION>
COMPANY 1-YEAR SURPLUS/ 3-YEAR SURPLUS/ 5-YEAR SURPLUS/ 10-YEAR SURPLUS/
NAME RETURN DEFICIT AVERAGE DEFICIT AVERAGE DEFICIT AVERAGE DEFICIT
RELATIVE RETURN RELATIVE RETURN RELATIVE RETURN RELATIVE
TO TO TO TO
INDUSTRY INDUSTRY INDUSTRY INDUSTRY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GENERAL +53.6 +46.8 +48.4 +36.2 +46.1 +27.1 +28.4 +12.8
ELECTRIC
DOVER +25.3 +18.5 +23.0 +10.8 +30.2 +11.2 +19.9 +4.2
DANAHER -11.1 -17.8 +27.6 +15.4 +30.1 +11.1 +29.1 +13.5
HONEYWELL +31.8 +25.0 +21.5 +9.3 +29.6 +10.5 +23.6 +8.0
INTERNATIONAL
TEXTRON +2.6 -4.1 +19.6 +7.3 +27.3 +8.3 +23.1 +7.4
ILLINOIS TOOL +17.6 +10.8 +20.3 +8.0 +26.5 +7.5 +21.1 +5.5
WORKS
INGERSOLL- +17.9 +11.1 +24.6 +12.3 +23.2 +4.2 +14.9 -0.8
RAND
PARKER- +59.2 +52.4 +27.7 +15.5 +22.6 +3.5 +19.2 +3.6
HANNIFIN
MINN. MINING & +41.1 +34.3 +8.3 -3.9 +16.8 2.2 +13.2 -2.4
M#
ITT INDUSTRIES -14.5 -21.3 +13.0 +0.7 +16.6 -2.5 +15.1 -0.6
PENTAIR #1.8 -8.6 +7.8 -1.4 +14.4 -4.6 +17.9 +2.2
STANLEY # +5.1 +6.2 -6.1 +13.9 -5.1 +7.6 -8.1
WORKS
PPG # # +6.2 -6.1 +13.8 -5.2 +15.4 -0.3
INDUSTRIES
CRANE # # +3.9 -8.4 +13.6 -5.5 +9.8 -6.9
TELEFLEX 30.5 # # 4.6 +13.5 -5.6 +13.1 -2.5
EATON +5.0 # # 8.6 +10.6 -8.4 +12.9 -2.7
COOPER # # # # # # # #
INDUSTRIES
NATIONAL # # # # # # # #
SERVICE INDUS
FMC # # # # # # # #
US INDUSTRIES # # # # # # # #
PEER AVERAGE # # # # # # # #
</TABLE>
38
<PAGE> 40
[OVERLAPPING BOX]
1-YEAR 3-YEAR 5-YEAR
RETURN RETURN RETURN
PARKER HANNIFIN 59.2 27.7 22.6
PARKER RANK #1 #2 #8
39
<PAGE> 41
What the Experts Say
Analysts' comments:
"Another accretive acquisition . . . The deal makes strategic sense."
Morgan Stanley Dean Witter
"An excellent strategic and complimentary fit." -- Schroder's
"Positive. . . makes strong strategic sense." -- Merrill Lynch
"Smart strategically. . . Smart financially." -- Midwest Research
"We rate PH stock a BUY with a $65 price target." -- Legg Mason
[LOGO] Commercial [LOGO] Parker
Intertech
40
<PAGE> 42
Your Stake in Parker
- - We'd love to welcome you as Parker shareholders
- - "What you own in Parker is a piece of virtually [PHOTOGRAPH]
everything that moves" Parker In Motion...
[LOGO] Commercial [LOGO] Parker
Intertech
41
<PAGE> 43
For More Information
* Check PHSTOCK.COM for information and updates
[Graphic depiction of Parker Web Site]
42
<PAGE> 44
* * * * * * * * * *
INVESTOR NOTICE
---------------
Investors and shareholders are advised to read the proxy statement/prospectus
regarding Parker-Hannifin Corporation's proposed merger with Commercial
Intertech Corp. referenced in the foregoing information, because it contains
important information. This proxy statement/prospectus was filed with the
Securities and Exchange Commission by Parker as part of Parker's Registration
Statement on Form S-4, which became effective February 28, 2000. Investors and
shareholders may obtain a free copy of the proxy statement/prospectus and other
documents filed by Parker at the Securities and Exchange Commission's web site
at www.sec.gov. The proxy statement/prospectus and such other documents also may
be obtained by directing such request to Parker-Hannifin Corporation, 6035
Parkland Boulevard, Cleveland, OH 44114, Office of Corporate Secretary, tel:
(216) 896-3000. Please note that the analysts comments on the slide entitled,
"What the Experts Say", are merely excerpts from their respective reports.
Investors and shareholders are advised to read the complete analysts reports on
this subject.
FORWARD-LOOKING STATEMENTS:
Forward-looking statements contained in this and other written and oral reports
are made based on known events and circumstances at the time of release, and as
such, are subject in the future to unforeseen uncertainties and risks. All
statements regarding future performance, events or developments, including
statements related to earnings accretion and synergies to be realized in the
merger, are forward-looking statements. It is possible that the company's future
performance may differ materially from current expectations expressed in these
forward-looking statements, due to a variety of factors such as changes in:
business relationships with and purchases by or from major customers or
suppliers; competitive market conditions and resulting effects on sales and
pricing; increases in raw-material costs which cannot be recovered in product
pricing; global economic factors, including currency exchange rates and
difficulties entering new markets; failure of the merger to be consummated;
ability to successfully integrate Commercial Intertech's business with Parker's;
and factors noted in the Registration Statement on Form S-4 filed by Parker in
connection with the proposed merger with Commercial Intertech and in Parker's
reports filed with the Securities and Exchange Commission.
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