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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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Thermo Instrument Systems Inc.
(Name of Subject Company)
Thermo Instrument Systems Inc.
(Name of Person(s) Filing Statement)
Common Stock, Par Value $.10 Per Share
(Title of Class of Securities)
883559 10 6
(CUSIP Number of Class of Securities)
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Polyvios C. Vintiadis
Member of the Special Committee
of the Board of Directors
c/o Richard A. Soden, Esq.
James A. Matarese, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
(617) 570-1000
(Name and Address and Telephone Number of Person Authorized to Receive Notice
and Communications on Behalf of the Person(s) Filing Statement)
With copies to:
Richard A. Soden, Esq.
James A. Matarese, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
(617) 570-1000
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company is Thermo Instrument Systems Inc., a
Delaware corporation (the "Company"), and the address of the principal
executive offices of the Company is 81 Wyman Street, Post Office Box 9046,
Waltham, Massachusetts, 02454-9046 and its phone number is (781) 622-1000.
The title of the class of equity securities to which this Schedule 14D-9
Solicitation/Recommendation Statement (this "Schedule 14D-9") relates is the
common stock, par value $.10 per share, of the Company (the "Shares" or the
"Common Stock"). As of March 31, 2000 there were 129,361,430 Shares issued and
outstanding, 5,600,038 Shares reserved for issuance pursuant to options
outstanding on such date under the Company's option plans, 7,012,623 Shares
reserved for issuance with respect to $250 million principal amount of the
Company's 4% convertible subordinated debentures due January 2005, and
5,006,385 Shares reserved for issuance with respect to $172.5 million
principal amount of the Company's 4.5% senior convertible debentures due
October 2003.
Item 2. Identity and Background of Filing Person.
This Schedule 14D-9 is being filed by the subject company, Thermo
Instrument Systems Inc. The contact information for the Company is listed in
Item 1 above.
This Schedule 14D-9 relates to the exchange offer by Thermo Electron
Corporation (the "Purchaser") to acquire all of the outstanding Shares which
are not currently owned by the Purchaser (the "Publicly Held Shares") at an
exchange ratio of 0.85 (the "Exchange Ratio") shares of Common Stock, par
value $1.00 per share, of the Purchaser (the "Purchaser Common Stock") for
each Share validly tendered, and upon the terms and subject to the conditions
set forth in the Purchaser's Prospectus dated April 24, 2000 (the
"Prospectus") and in the related letter of transmittal (which, together with
the Prospectus, constitutes the "Offer"). The Purchaser filed a Registration
Statement on Form S-4 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") on April 24, 2000, of which the
Prospectus forms a part.
The Prospectus states that if the Offer is completed, the Purchaser will
own at least 90% of the Company's outstanding Shares. According to the
Prospectus, following the completion of the Offer, the Purchaser will cause
the Company to merge with and into the Purchaser (the "Merger") in a so-called
"short-form" merger. A short-form merger would not require approval of the
Company's Board of Directors or the stockholders of the Company other than the
Purchaser.
The Purchaser's principal executive offices, as set forth on the
Prospectus, are located at 81 Wyman Street, P.O. Box 9046, Waltham, MA 02454-
9046 and its phone number is (781) 622-1000.
All information contained in this Schedule 14D-9 or incorporated herein by
reference concerning the Purchaser, or actions or events with respect to it,
was provided for inclusion herein by the Purchaser or obtained from reports or
statements filed by the Purchaser with the Commission, including, without
limitation, the Registration Statement and the Prospectus, and the Company
takes no responsibility for such information.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
History of the Company. The Company was incorporated as a Delaware
corporation in May 1986 as a wholly-owned subsidiary of the Purchaser, to
operate the instruments businesses that were previously conducted by several
of the Purchaser's subsidiaries. In August 1986, the Company conducted an
initial public offering of its Common Stock. Following this offering, the
Purchaser, through its ownership of Common Stock, maintained a controlling
stake in the Company. The Company is a worldwide leader in developing,
manufacturing and marketing measurement and detection instruments used to
collect, monitor and analyze information. The Company's customers use these
systems for multiple applications in a range of industries, including
industrial processing, food and beverage production, life sciences research
and medical diagnostics. According to the Prospectus, the Purchaser develops,
manufactures and sells measurement and detection instruments that are used to
collect, monitor and analyze data and conducts these businesses in significant
part through the Company.
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As described below under "Item 4--The Solicitation or Recommendation," on
January 31, 2000, the Purchaser announced a restructuring plan pursuant to
which it expects to spin in, spin off and sell various businesses to focus
solely on its core measurement and detection instruments business. In that
announcement, the Purchaser stated that it planned to take private certain of
its majority-owned subsidiaries, including the Company, by seeking to acquire
the remaining minority interests in such subsidiaries. On April 24, 2000, the
Purchaser filed the Registration Statement (of which the Prospectus forms a
part) with the Commission and formally commenced the Offer. The Prospectus
also has been filed as Exhibit 6 hereto.
Based on the Prospectus, as of March 31, 2000, the Purchaser beneficially
owned 114,602,387 Shares, representing approximately 88.6% of the then issued
and outstanding Shares.
Composition of the Company's Board of Directors. The Company's Board of
Directors currently consists of the following two members:
<TABLE>
<C> <S>
Earl R. Lewis Mr. Lewis, 56, has been a director and the chief
executive officer of the Company since January 1998, and
has been president of the Company since March 1997. He
was chief operating officer of the Company from January
1996 to January 1998. Prior to that time, he was
executive vice president of the Company from January
1996 to March 1997 and senior vice president from
January 1994 to January 1996. Mr. Lewis has been the
chief operating officer, measurement and detection, of
the Purchaser since September 1998. Prior to his
appointment as chief operating officer, Mr. Lewis served
as senior vice president of the Purchaser from June 1998
to September 1998 and vice president from September 1996
to June 1998. Mr. Lewis served as chief executive
officer of Thermo Optek Corporation from its inception
in August 1995 to January 1998. Mr. Lewis is a director
of FLIR Systems Inc., Metrika Systems Corporation,
SpectRx Inc., Spectra-Physics Lasers, Inc., Thermo Optek
Corporation and ThermoQuest Corporation.
Polyvios C. Vintiadis Mr. Vintiadis, 64, is the sole member of the Special
Committee of the Board of Directors of the Company,
which was established to consider the Offer (the
"Special Committee") (See "Item 4--The Solicitation or
Recommendation"). He has been a director of the Company
since July 1993. Mr. Vintiadis has been the chairman and
chief executive officer of Towermarc Corporation, a real
estate development company located at Two Sound View
Drive, Greenwich, CT 06830, since 1984. Mr. Vintiadis is
also a director of Spectra-Physics Lasers, Inc. and
Thermo TerraTech Inc.
</TABLE>
Executive Officers of the Company. The following persons are currently
executive officers of the Company:
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
Earl R. Lewis....................... President and Chief Executive Officer
Theo Melas-Kyriazi.................. Chief Financial Officer
Denis Helm.......................... Senior Vice President
Richard W. K. Chapman............... Vice President
Barry S. Howe....................... Vice President
</TABLE>
Actual or Potential Conflicts of Interest. Certain directors and executive
officers of the Company have interests in connection with the Offer that
present them with actual or potential conflicts of interest, as summarized
herein.
Mr. Vintiadis, the sole member of the Special Committee, owns 262 Shares.
In addition, Mr. Vintiadis has options to acquire 11,745 Shares at exercise
prices ranging from $11.86 to $27.89 per Share that are currently
exerciseable. He also has accumulated deferred units representing 5,590 Shares
under the Company's Deferred Compensation Plan for directors as of January 1,
2000.
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Executive officers and directors of the Company who own Shares and tender
such Shares will receive shares of Purchaser Common Stock at the Exchange
Ratio, or 0.85 shares of Purchaser Common Stock for each Share validly
tendered, on the same terms as set forth in the Prospectus. According to the
Prospectus, as of January 31, 2000, the members of the Board of Directors and
executive officers of the Company owned in the aggregate 168,043 Shares
(excluding Shares associated with deferred units accumulated under the
Company's Deferred Compensation Plan for directors). Assuming all members of
the Board of Directors, other than Mr. Vintiadis, and all executive officers
actually tender their Shares as they have indicated in the Prospectus and Mr.
Vintiadis tenders his Shares as he has indicated herein, our directors and
executive officers would receive in the aggregate 142,836 shares of Purchaser
Common Stock in exchange for their Shares.
In addition, as of January 31, 2000, the directors, including Mr.
Vintiadis, and executive officers of the Company held options to acquire an
aggregate of 1,270,168 Shares. Such options were issued under the Company's
Equity Incentive Plan, Directors Stock Option Plan or Employees Equity
Incentive Plan and have exercise prices ranging from $4.88 to $27.89 per
Share. Upon the acquisition of the Shares and the subsequent Merger, the
Purchaser will assume these options and will convert such options into options
to acquire Purchaser Common Stock on the same terms as all of the other
holders of the Company's options. According to the Prospectus, the number of
shares of Purchaser Common Stock underlying each assumed option immediately
following the Merger will equal the number of Shares underlying the option
immediately before the Merger multiplied by the Exchange Ratio, and the
exercise price for each assumed option immediately following the Merger will
be the exercise price of the option immediately before the Merger divided by
the Exchange Ratio. Thus, if the Offer and the Merger are completed, Mr.
Vintiadis' options to acquire 11,745 Shares at current exercise prices ranging
from $11.86 to $27.89 will be converted into options to acquire 9,983 shares
of Purchaser Common Stock at exercise prices ranging from $13.95 to $32.81.
According to the Prospectus, in connection with the Offer and the Merger
the Purchaser will assume the Company's Deferred Compensation Plan for
directors and the units for Shares outstanding under the plan immediately
prior to the Merger will be automatically converted into units for shares of
Purchaser Common Stock at the Exchange Ratio. Accordingly, as stated in the
Prospectus, based on the 5,590 units accumulated by Mr. Vintiadis as of
January 1, 2000, Mr. Vintiadis would receive units for 4,751.5 shares of
Purchaser Common Stock.
Certain directors and executive officers of the Company are directors or
officers of the Purchaser. Certain directors and executive officers of the
Company also hold equity interests in the Purchaser. Theo Melas-Kyriazi, the
chief financial officer of the Company, is also the chief financial officer of
the Purchaser. Earl R. Lewis, the president, chief executive officer and a
director of the Company, is chief operating officer, measurement and detection
of the Purchaser. Consequently, these directors and officers receive or have
received compensation not only from the Company but also from the Purchaser
and its affiliates. In addition to his ownership of Shares, Mr. Vintiadis owns
2,500 shares of Purchaser Common Stock. See Annex A to the Prospectus, which
is Exhibit 6 hereto and incorporated herein by reference, for a listing of the
positions that the directors and executive officers of the Company hold with
the Purchaser and their ownership of Purchaser Common Stock.
Certain directors and executive officers of the Purchaser own Common Stock
or hold options to purchase the Common Stock of the Company. In addition,
certain directors and executive officers of the Purchaser are also directors
or executive officers of the Company. These positions and equity interests
present these directors and executive officers with actual or potential
conflicts of interest in determining the fairness of the Offer and the Merger
to the Public Shareholders. See Annex A to the Prospectus, which is Exhibit 6
hereto and incorporated herein by reference, for a listing of the positions
that the directors and executive officers of the Purchaser hold with the
Company and their ownership of the Common Stock of the Company.
The Purchaser has entered into separate indemnification agreements (the
"Purchaser Indemnification Agreements") with each of the Company's executive
officers and directors, including Mr. Vintiadis, providing for the
indemnification and advancement of expenses to such person directly by the
Purchaser in the event that such person, by reason of his or her status as a
director or officer of the Company (or service as a director, officer or
fiduciary of another entity at the request of the Purchaser), is made or is
threatened to be made party to any threatened, pending or completed action,
suit or other proceeding, whether civil, criminal, administrative or
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investigative, if such officer or director acted in good faith and in a manner
believed to be in or not opposed to the best interests of the Purchaser and,
in the case of a criminal action or proceeding, had no reason to believe his
or her conduct was unlawful. Each of the directors of the Company, including
Mr. Vintiadis, also has entered into an indemnification agreement with the
Company, on terms and conditions similar to the Purchaser Indemnification
Agreements. Forms of such indemnification agreements are attached hereto as
Exhibit 9 and Exhibit 10.
Certain Other Relationships and Related Transactions. The Company and the
Purchaser are also parties to certain other agreements, arrangements and
understandings, as summarized below. The Company and the Purchaser have
entered into a Corporate Services Agreement (the "Services Agreement") under
which the Purchaser's corporate staff provides certain administrative
services, including certain legal advice and services, risk management,
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management and financial and other services to the Company.
The Company was assessed an annual fee equal to 0.8% of the Company's revenues
for these services in fiscal 1999, excluding the revenues of Spectra-Physics
Lasers, Inc., which does not participate in the Services Agreement. The annual
fee will remain at 0.8% of the Company's revenues for fiscal 2000. The fee is
reviewed annually and may be changed by mutual agreement of the Company and
the Purchaser. During fiscal 1999, the Purchaser assessed the Company $15.7
million in fees under the Services Agreement. Management believes that the
charges under the Services Agreement are reasonable and that the terms of the
Services Agreement are fair to the Company. In fiscal 1999, the Company was
billed an additional $125,000 by the Purchaser for certain administrative
services required by the Company that were not covered by the Services
Agreement. The Services Agreement automatically renews for successive one-year
terms, unless canceled by the Company upon 30 days' prior notice. In addition,
the Services Agreement terminates automatically in the event the Company
ceases to be a Purchaser subsidiary or ceases to be a participant in the
Purchaser's corporate charter. In the event of a termination of the Services
Agreement, the Company will be required to pay a termination fee equal to the
fee that was paid by the Company for services under the Services Agreement for
the nine-month period prior to termination. Following termination, the
Purchaser may provide certain administrative services on an as-requested basis
by the Company or as required in order to meet the Company's obligations under
the Purchaser's policies and procedures. The Purchaser will charge the Company
a fee equal to the market rate for comparable services if such services are
provided to the Company following termination.
The Company has entered into a Tax Allocation Agreement with the Purchaser
that outlines the terms under which the Company will be included in the
Purchaser's consolidated federal and state income tax returns. Under current
law, the Company will be included in such tax returns so long as the Purchaser
owns at least 80% of the Company's outstanding Common Stock. In years in which
the Company has taxable income, it will pay to the Purchaser amounts
comparable to the taxes the Company would have paid if it had filed its own
separate company tax returns. If the Purchaser's equity ownership of the
Company were to drop below 80%, the Company would file its own tax returns. In
1999, the Company paid the Purchaser $34,800,000 under the Tax Allocation
Agreement. As of January 1, 2000, the Company owed the Purchaser $18,150,000
for amounts due under the Tax Allocation Agreement.
The Company purchases and sells products and/or services in the ordinary
course of business to the Purchaser and the Purchaser's other subsidiaries. In
1999, the Company sold a total of $1,240,000 of products to the Purchaser and
its other subsidiaries and purchased a total of $1,642,000 of products and/or
services from such companies.
As of January 1, 2000, the Company had outstanding $140,000,000 of
indebtedness to the Purchaser, represented by a 3 3/4% Senior Convertible Note
due 2000. In February 2000, the Purchaser converted this note into 10,334,620
shares of the Company's Common Stock at a conversion rate of $13.55 per share.
In March 1999, the Company borrowed $200,000,000 from the Purchaser to
partially fund its acquisition of Spectra-Physics AB ("SPAB") pursuant to the
Company's tender offer for all of the outstanding shares of SPAB. In August
1999, the Company repaid $50,000,000 of the principal amount outstanding under
the promissory note and refinanced the balance of the note due February 2000
through borrowings from the Purchaser. In February 2000, the Purchaser
extended the note to August 2000. This note bears interest at a rate
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equal to the 30-day Dealer Commercial Paper Rate as reported in the Wall
Street Journal ("DCP Rate") plus 150 basis points provided the note shall be
reduced to the DCP Rate plus 50 basis points to the extent of any funds
invested by the Company's majority-owned subsidiaries in the Purchaser's
domestic cash management arrangement. The rate at fiscal 1999 year end was
6.0%.
In March 2000, the Purchaser agreed to loan the Company up to $400 million
to finance the acquisitions by the Company of the minority interests in
certain of its majority-owned subsidiaries. The loan bears interest at a rate
equal to the 30-day DCP Rate plus 150 basis points, adjusted at the beginning
of each fiscal month of the Company. The interest rate will be reduced to the
DCP Rate plus 50 basis points to the extent of any funds invested by the
Company's majority-owned subsidiaries in the Purchaser's cash management
arrangement. As of April 29, 2000, approximately $103 million was outstanding
under this loan arrangement.
The Company, along with certain U.K.-based Purchaser subsidiaries,
participates in a notional pool arrangement in the U.K. with Barclays Bank,
which includes a $114,943,000 credit facility. The Company has access to
$60,200,000 under this credit facility. Under this arrangement, Barclays
notionally combines the positive and negative cash balances held by the
participants to calculate the net interest yield/expense for the group. The
benefit derived from this arrangement is then allocated based on balances
attributable to the respective participants. The Purchaser guarantees all of
the obligations of each participant in this arrangement. As of January 1,
2000, the Company had a positive cash balance of approximately $41,426,000 and
a negative cash balance of approximately $41,403,000 based on an exchange rate
of $1.6171/GBP 1.00. For 1999, the average annual interest rate earned on GBP
deposits by participants in this credit arrangement was approximately 5.44%
and the average annual interest rate paid on overdrafts was approximately
5.8025%.
At year-end 1998, $392,000,000 of the Company's cash equivalents were
invested in a repurchase agreement with the Purchaser. Under this agreement,
the Company in effect lent excess cash to the Purchaser, which the Purchaser
collateralized with investments principally consisting of corporate notes,
U.S. government agency securities, commercial paper, money market funds and
other marketable securities, in the amount of at least 103% of such
obligation. The Company's funds subject to the repurchase agreement were
readily convertible into cash by the Company. The repurchase agreement earned
a rate based on the 90-day Commercial Paper Composite Rate plus 25 basis
points, set at the beginning of each quarter.
Effective June 1999, the Company and the Purchaser commenced use of a new
domestic cash management arrangement. Under the new arrangement, amounts
advanced to the Purchaser by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points,
set at the beginning of each month. The Purchaser is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Purchaser subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice. At
year-end 1999, the Company had invested $256,522,000 under this arrangement.
In addition, certain of the Company's European-based subsidiaries participate
in a new cash management arrangement with a wholly owned subsidiary of the
Purchaser on terms similar to the domestic cash management arrangement. The
Company has access to a $43,300,000 line of credit under this arrangement, of
which the Company had invested $20,767,000 and had borrowed $18,658,000 at
year-end 1999. Interest under this arrangement is calculated based on Euro
market rates and was 3.25% on the positive balance and 3.95% on the negative
balance at year-end 1999.
The Company, along with certain other Purchaser subsidiaries, has entered
into a cash management arrangement with ABN AMRO. Only European-based
Purchaser subsidiaries participate in this arrangement. The new arrangement
with ABN AMRO consists of a zero balance arrangement, which includes a
$25,417,000 credit facility. The Company has access to $8,663,000 under this
credit facility. Funds borrowed by the Company under this arrangement pay
interest at a rate set by Thermo Finance B.V., a wholly-owned subsidiary of
the Purchaser, at the beginning of each month, based on Netherlands market
rates. Funds invested by the Company under the
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arrangement earn a rate set by Thermo Finance B.V. at the beginning of each
month, based on Netherlands market rates. Such invested funds are
collateralized with investments principally consisting of corporate notes,
U.S. government-agency securities, commercial paper, money market funds, and
other marketable securities, in the amount of at least 103% of such
obligation. The Purchaser guarantees all of the obligations of each
participant in this arrangement. As of January 1, 2000, the Company had a
positive cash balance of approximately $16,505 and a negative cash balance of
approximately $5,502,000, based on an exchange rate of $0.4554/NLG 1.00. As of
January 1, 2000, the average annual interest rate earned on NLG deposits by
participants in this credit arrangement was approximately 3.19% and the
average annual interest rate paid on overdrafts was approximately 3.74%.
At January 1, 2000, the Company owed the Purchaser and its other
subsidiaries an aggregate of $9,193,000 for amounts due under the Services
Agreement and related administrative charges, for other products and services,
and for miscellaneous items, excluding loans described above and $18,150,000
due to the Purchaser under the Tax Allocation Agreement, net of amounts owed
to the Company by the Purchaser and its other subsidiaries for products,
services and other miscellaneous items. The largest amount of such net
indebtedness owed by the Company to the Purchaser and its other subsidiaries
since January 2, 1999 was $12,654,000. These amounts do not bear interest and
are expected to be paid in the normal course of business.
Certain Compensation Matters; Agreements. Certain contracts, agreements,
arrangements and understandings between the Company or its affiliates and
certain of the Company's executive officers, directors or affiliates are
described at pages 10 and 11 of the Company's Amendment Number One on Form 10-
K/A to Form 10-K for the fiscal year ended January 1, 2000 (File No. 1-9786)
(the "10-K Amendment") in the section entitled "Executive Retention
Agreements." A copy of such pages of the 10-K Amendment is filed as Exhibit 11
hereto and such portion of the 10-K Amendment is incorporated herein by
reference.
In addition to the fees he receives for serving as a director of the
Company, Mr. Vintiadis received from the Company a one-time fee of $10,000 for
serving on the Special Committee. He will also receive an attendance fee of
$1,000 for each in-person Special Committee meeting, $500 for each telephonic
Special Committee meeting, and reimbursement for out-of-pocket expenses
incurred in connection with his service on the Special Committee.
Transactions Between the Company and the Purchaser. Certain contracts,
agreements, arrangements and understandings between the Company or its
affiliates and the Purchaser are described on pages 25 through 27 and page 57
of the Prospectus, which is Exhibit 6 hereto and incorporated herein by
reference.
Material Agreements, Arrangements or Understandings Relating to the Company
and the Offer. Certain contracts, agreements, arrangements and understandings
relating to the Company and the Offer are described at pages 23 and 24 and
pages 27 through 31 of the Prospectus, which is Exhibit 6 hereto and
incorporated herein by reference. Other than as a result of being the subject
of the Purchaser's Offer, the Company is not a party to any of such contracts,
agreements, arrangements and understandings relating to the Company and the
Offer.
Intent to Tender. To the Company's knowledge, after reasonable inquiry, all
directors and all executive officers of the Company who own Shares, including
Mr. Vintiadis, currently intend to tender their Shares pursuant to the Offer.
Item 4. The Solicitation or Recommendation.
Position of the Special Committee
The Special Committee, whose only member consists of the sole independent
director of the Company, Polyvios C. Vintiadis, recommends that holders of
Shares other than the Purchaser and the officers and directors of the Company
(the "Public Shareholders") accept the Offer and tender their Shares pursuant
to the Offer. At a
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meeting of the Special Committee held on May 5, 2000, the Special Committee
determined that the 0.85 per Share Exchange Ratio proposed by the Purchaser
was fair consideration to be paid to the Public Shareholders and resolved to
recommend that the Public Shareholders accept the Offer and tender their
Shares pursuant to the Offer. As a result of the potential conflict of
interest among the members of the Company's Board of Directors (other than
Mr. Vintiadis) and the Purchaser by virtue of the Purchaser's majority
ownership of the Company, the Board of Directors of the Company delegated to
the Special Committee the sole and exclusive authority to respond to the Offer
and to either recommend for, recommend against or remain neutral and express
no opinion with respect to whether or not Public Shareholders should accept
the Offer and tender their Shares pursuant to the Offer.
Background; Reasons for the Special Committee's Position
On January 31, 2000, as part of its overall restructuring plan pursuant to
which it expects to spin in, spin off and sell various businesses to focus
solely on its core measurement and detection instruments business, the
Purchaser announced that it planned to take private certain of its majority-
owned subsidiaries, including the Company, by seeking to acquire the remaining
minority interests in such subsidiaries. In particular, the Purchaser
announced that it would make an exchange offer for all of the outstanding
publicly traded shares of the Company. Subsequently, on March 8, 2000, the
Purchaser announced that the Exchange Ratio for the Offer would be 0.85 shares
of Purchaser Common Stock for each Share validly tendered in the Offer.
According to the Prospectus, the Offer is conditioned upon the Purchaser
acquiring a sufficient number of Publicly Held Shares such that it will own at
least 90% of the total outstanding Shares. Structuring the transaction as an
exchange offer to acquire ownership of at least 90% of the outstanding Shares
permits the Purchaser to cause a merger of the Company and the Purchaser
without any vote of the shareholders of the Company pursuant to the "short-
form" merger provisions of the Delaware General Corporation Law. Pursuant to
such a "short-form" merger, the remaining Public Shareholders also would
receive shares of Purchaser Common Stock at the Exchange Ratio.
As the controlling stockholder of the Company, the Purchaser could cause
the Company to call a special meeting of shareholders for the purpose of
seeking the approval of a merger of the Company and the Purchaser, pursuant to
which the holders of Publicly Held Shares would receive shares of Purchaser
Common Stock at the Exchange Ratio. At such a meeting, the Purchaser would
have sufficient votes by virtue of its ownership of Shares to approve such a
transaction regardless of how holders of Publicly Held Shares vote their
Shares. Such a transaction is commonly referred to as a "long-form" merger
because approval of the shareholders is required to consummate the
transaction. The Special Committee believes that the Purchaser has chosen to
pursue an exchange offer followed by a "short-form" merger rather than a
"long-form" merger in an effort to acquire the Publicly Held Shares in an
expeditious manner and provide the Public Shareholders with a prompt
opportunity to receive Shares of Purchaser Common Stock at the Exchange Ratio.
Because the Purchaser owns approximately 88.6% of the total outstanding
Shares, the Purchaser only needs to acquire an additional 1.4% of the total
outstanding Shares, or approximately 12.3% of the total outstanding Publicly
Held Shares, in order for the Purchaser to own sufficient Shares to effect a
"short-form" merger. According to the Prospectus, if the Offer is not
successful, the Purchaser may make open market or privately negotiated
purchases of Publicly Held Shares to the extent necessary in order for it to
own at least 90% of the total outstanding Shares. For additional information
about the terms and conditions of the Offer and the Purchaser's reasons for
making the Offer, shareholders should read the Prospectus, which has been
mailed to shareholders directly by the Purchaser and which forms a part of the
Registration Statement filed with the Commission on April 24, 2000.
As a result of the potential conflict of interest between the Company and
the Purchaser by virtue of the Purchaser's control of the Company and its
Board of Directors, the Board of Directors established the Special Committee
consisting of the only member of the Board of Directors who is not also an
officer or director of the Purchaser. The Special Committee was given the sole
and exclusive authority to respond to the Offer and to either recommend for,
recommend against or remain neutral and express no opinion with respect to
whether or not Public Shareholders should accept the Offer and tender their
Shares pursuant to the Offer. Other than as described in the preceding
sentence, the Special Committee was given no other authority or
responsibilities, and in particular, was not given the authority to "shop" the
Company to prospective third-party purchasers or explore other strategic
7
<PAGE>
alternatives that might enhance or maximize shareholder value for the Public
Shareholders. To assist it in performing its responsibilities, the Special
Committee retained Tucker Anthony Cleary Gull ("Tucker Anthony") as separate
independent financial advisor and Goodwin, Procter & Hoar LLP as separate
independent legal counsel. The Special Committee was familiar with both its
legal counsel and financial advisor because they had recently advised the
independent special committees of three of the Company's majority-owned
subsidiaries in connection with similar transactions involving the Company's
acquisition of the entire equity ownership of those subsidiaries.
Pursuant to the authority granted to it by the Company's Board of
Directors, the Special Committee undertook to determine independently, with
the advice of its legal counsel and financial advisor, the adequacy of the
terms of the Offer and whether to recommend for, recommend against or remain
neutral and express no opinion with respect to the Offer based primarily on
the information furnished to the Special Committee by the Company's management
and the Purchaser's management. The Special Committee also reviewed the
information concerning the Offer set forth in the Prospectus. After receiving
advice from its legal counsel and financial advisor concerning the adequacy of
the Offer, the Special Committee inquired as to whether the Purchaser would
consider any negotiation concerning the Exchange Ratio, but was informed that
the Purchaser would not engage in any such negotiation. The Special Committee
also discussed with representatives of the Purchaser the anticipated timing of
the Offer and other administrative matters relating to the Offer. Except as
described above, the Special Committee did not participate in any
communications or negotiations concerning the terms and conditions of the
Offer, including the Exchange Ratio, with the Purchaser.
The Special Committee, prior to expressing its position with respect to the
Offer, received advice, opinions, views or presentations from, and discussed
the Offer with, the Company's management, the Purchaser's management and
Tucker Anthony. In expressing its position with respect to the Offer, the
Special Committee considered a number of factors including, but not limited
to, the following:
(i) Business and Prospects of the Company and the Purchaser. The Special
Committee received advice from Tucker Anthony concerning the
Company's and the Purchaser's historical and current financial
condition and operating results, as well as the future prospects of
the Company and the Purchaser, based on discussions with senior
management of the Company and the Purchaser, respectively.
(ii) Fixed Exchange Ratio. The 0.85 per Share Exchange Ratio is fixed.
Accordingly, the Exchange Ratio will not be adjusted to reflect
changes in the price at which the shares of Purchaser Common Stock
trade during the pendency of the Offer and the Merger. The fact that
the Exchange Ratio is fixed may be favorable or unfavorable to the
Public Shareholders depending on the price at which the shares of
Purchaser Common Stock trade during the pendency of the Offer and the
Merger. For example, if the market price of the Purchaser Common
Stock increases between now and the completion of the Offer and the
Merger, Public Shareholders who tender their Shares will receive
shares of Purchaser Common Stock having greater value than such
shares have today. Conversely, if the market price of the Purchaser
Common Stock decreases between now and the completion of the Offer
and the Merger, Public Shareholders who tender their Shares will
receive shares of Purchaser Common Stock having lesser value than
such shares have today.
(iii) Potential Benefits Associated with the Purchaser's Reorganization.
The Special Committee considered the anticipated benefits of the
Purchaser's reorganization plan, which according to the Prospectus
consists principally of the acquisition of the public minority
interest in most of its subsidiaries, including the Company, the
spin-off of two of the Purchaser's businesses and the sale of
certain of its non-core businesses. As described in the Prospectus,
one of the objectives of the Purchaser's reorganization plan is to
permit the Purchaser to focus primarily on a variety of segments in
the instruments business. In addition, the Purchaser's
reorganization plan seeks to eliminate the complexity of the
Purchaser's corporate structure, permit the Purchaser to conduct its
operations in a more coordinated manner with its other instruments
subsidiaries, eliminate additional burdens on management associated
with public reporting, and achieve cost savings, particularly those
associated
8
<PAGE>
with the Company having public shareholders. The Special Committee
believes that the foregoing aspects of the Purchaser's reorganization
plan will yield significant benefits to the Public Shareholders if the
reorganization plan is successfully implemented.
(iv) Risks Associated with the Purchaser's Reorganization. The Special
Committee considered the various risks associated with the Purchaser's
reorganization plan. As more fully described in the Prospectus, these
risks included, but are not limited to, the fact that: (i) the
reorganization plan is subject to various third party consents and
approvals, including, without limitation, favorable rulings from the
Internal Revenue Service with respect to the proposed spin-offs; (ii)
the divestitures to be effected by the Purchaser may not occur for
various reasons more fully described in the Prospectus; (iii) Public
Shareholders who tender their Shares in the Offer will be subject to
the risk that the Purchaser's management fails to successfully
integrate and consolidate its instrument businesses; (iv) the
reorganization contemplates the issuance of a significant number of
additional shares of Purchaser Common Stock, which may depress the
price of such stock in the future; (v) the Purchaser's acquisition
strategy may not be implemented successfully; and (vi) the Purchaser
may not complete the reorganization in a timely manner, which could
negatively affect the public market's confidence in the Purchaser's
management, and may in turn adversely affect the market price of the
Purchaser Common Stock. As stated in the Prospectus, if the Purchaser
is not able to effect all aspects of the reorganization, it may not
achieve some or all of the anticipated benefits of the reorganization.
For a more detailed discussion of the risks associated with the
Purchaser's reorganization plan, see the section entitled "Risk
Factors" in the Prospectus, which has been filed with the Commission
and as Exhibit 6 hereto.
(v) Participation in Future Growth. The Special Committee also considered
the fact that Public Shareholders who tender their shares in the Offer
will have the opportunity to participate in the future growth prospects
of the Company through their ownership of Purchaser Common Stock. As
stated in the Prospectus, the Purchaser intends to retain the Company
as part of its core instruments business following completion of the
Offer and the Merger.
(vi) Market Information Regarding Publicly Held Shares and Purchaser Common
Stock. The Special Committee considered historical market prices and
trading information with respect to the Publicly Held Shares and the
shares of Purchaser Common Stock and a comparison of these market
prices and trading information with those of selected publicly held
companies operating in industries similar to that of the Company and
the Purchaser. The Special Committee also considered the sales,
earnings and price to earnings multiples at which the Publicly Held
Shares, the shares of Purchaser Common Stock and the securities of
such selected publicly held companies trade. See "Opinion of Financial
Advisor" below.
(vii) Financial Analysis of Exchange Ratio. The Special Committee
considered a financial analysis of the Exchange Ratio performed by
Tucker Anthony using various methodologies, including a selected
comparable public companies analysis, a selected merger and
acquisition transactions analysis and a discounted cash flow
analysis. A summary of Tucker Anthony's analysis appears on pages 11
through 23 of this Schedule 14D-9 under the section entitled "Opinion
of Financial Advisor."
(viii) Market Price Considerations. The Special Committee considered the
fact that the ratio of the price of the Publicly Held Shares to the
price of the shares of Purchaser Common Stock was 0.83 based on the
closing price of the Publicly Held Shares ($19.94) on the American
Stock Exchange (the "AMEX") on March 7, 2000 (the trading day
immediately preceding the Purchaser's public announcement of the
Exchange Ratio) and the closing price of shares of Purchaser Common
Stock ($24.00) on the New York Stock Exchange (the "NYSE") on March
7, 2000. The Special Committee noted that during the twelve months
preceding March 7, 2000, the ratio of the price of the Publicly Held
Shares to the price of the shares of Purchaser Common Stock ranged
from a high of 1.20 to a low of 0.62, with a mean and median over
the same period of 0.84 and 0.80, respectively. The Special
Committee also noted that during the nine months preceding January
28, 2000 (the trading day immediately preceding the
9
<PAGE>
Purchaser's public announcement of its reorganization plan on January
31, 2000), the ratio of the price of the Publicly Held Shares to the
price of the shares of Purchaser Common Stock ranged from a high of
1.15 to a low of 0.62, with a mean and a median of 0.79.
(ix) Liquidity and Trading Volume. The Special Committee considered the
fact that historically there has been relatively low trading volume of
the Publicly Held Shares and that tendering Shares in the Offer would
result in increased liquidity for the Public Shareholders because
tendering Public Shareholders would receive shares of Purchaser Common
Stock which, relative to the Publicly Held Shares, have had a
significantly greater historic trading volume. In this regard, the
Special Committee noted the limited trading volume of the Publicly
Held Shares on the AMEX, as evidenced by its average monthly trading
volume (approximately 912,000 Shares per month over the twelve months
prior to January 28, 2000, the last trading day prior to the first
public announcement of the Offer), and the limited public float of
such shares resulting from the majority ownership of the Company by
the Purchaser. The Special Committee compared this to the trading
volume of the shares of Purchaser Common Stock on the NYSE, as
evidenced by its average monthly trading volume (approximately
11,600,000 shares per month over the twelve months prior to January
28, 2000).
(x) Fairness Opinion. The Special Committee considered the opinion of
Tucker Anthony, delivered to the Special Committee on May 5, 2000, that
as of such date and based upon and subject to the limitations set forth
therein, the Exchange Ratio of 0.85 per Share was fair, from a
financial point of view, to the Public Shareholders (a copy of such
opinion is attached hereto as Schedule I to this Schedule 14D-9 and is
incorporated herein by reference).
(xi) Inability to Negotiate Offer Price and "Shop" the Company. The Special
Committee considered the fact that the Purchaser was not willing to
negotiate the Exchange Ratio, did not "shop" the Company to
prospective purchasers and did not authorize the Special Committee to
explore other strategic alternatives that might enhance or maximize
shareholder value for the Public Shareholders. The Special Committee
noted that receiving actual offers from unaffiliated third parties
might have been another means by which to determine the value of the
Publicly Held Shares.
(xii) Availability of Dissenters' Appraisal Rights. The Special Committee
considered the fact that Public Shareholders who do not tender their
Shares in the Offer will have dissenters' appraisal rights under
Delaware law in connection with the merger of the Company with the
Purchaser. However, Public Shareholders who exercise their appraisal
rights may receive more or less for their Publicly Held Shares than
the value of the shares of Purchaser Common Stock they would
otherwise have received had they tendered their Shares in the Offer.
(xiii) Alternative Squeeze-Out Structures. The Special Committee considered
the fact that the Purchaser could have pursued, and could pursue if
the Offer is not successful, a "long-form" merger pursuant to which
it could cause the Company to call a special meeting of shareholders
for the purpose of seeking the approval of a merger of the Company
and the Purchaser, at which meeting the Purchaser would have
sufficient votes to obtain such approval. If the Offer is not
successful, the Purchaser also may make open market or privately
negotiated purchases of Publicly Held Shares to the extent necessary
in order for the Purchaser to own at least 90% of the total
outstanding Shares and therefore effect a "short-form" merger.
In view of the variety of factors considered by the Special Committee, the
Special Committee did not find it practicable to and did not assign relative
weights to the factors set forth above. Rather, the Special Committee reached
its determination based on the totality of the circumstances and the advice
presented to it by its legal and financial advisors.
In analyzing the Offer, the Special Committee was assisted and advised by
representatives of Tucker Anthony and the Special Committee's legal counsel,
who reviewed various financial, legal and other
10
<PAGE>
considerations with the Special Committee. The full text of the written
opinion of Tucker Anthony, setting forth the procedures followed, the matters
considered, the scope of the review undertaken and the assumptions made by
Tucker Anthony in arriving at its opinion, is attached as Schedule I to this
Schedule 14D-9 and is incorporated herein by reference. Public Shareholders
are urged to, and should, read such opinion carefully and in its entirety. The
opinion was provided for the information and assistance of the Special
Committee in connection with its consideration of the Offer. Such opinion
addresses only the fairness, from a financial point of view, of the Exchange
Ratio to the Public Shareholders and does not constitute a recommendation to
any such holder as to whether or not to tender Publicly Held Shares in the
Offer.
Opinion of Financial Advisor
The Special Committee retained Tucker Anthony in April 2000 to act as its
financial advisor and to render an opinion to the Special Committee as to
whether the Exchange Ratio as provided for in the Offer is fair, from a
financial point of view, to the Public Shareholders.
The Special Committee selected Tucker Anthony for a number of reasons,
including its knowledge of the industry segments in which the Company conducts
its business and its experience and reputation in the area of valuation and
financial advisory work generally, and in relation to transactions of the size
and nature of the proposed transaction specifically. Tucker Anthony is a
nationally recognized investment banking firm and is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, private placements
and valuations for corporate and other purposes. From time to time, Tucker
Anthony and its affiliates may hold long or short positions in the Common
Stock or the Purchaser Common Stock.
Tucker Anthony rendered its written opinion to the Special Committee on May
5, 2000, to the effect that, as of that date, the Exchange Ratio was fair,
from a financial point of view, to the Public Shareholders. Tucker Anthony has
not been requested to, and will not, update its opinion unless the Special
Committee requests such an update. The Special Committee has advised Tucker
Anthony that it will not seek an update to the fairness opinion unless:
. there is a material modification to the terms of the proposed
consideration or other material amendment to the Offer that the Special
Committee determines would be reasonably likely to impact the overall
fairness of the Exchange Ratio to the Public Shareholders; or
. a material event occurs that the Special Committee determines would be
reasonably likely to affect Tucker Anthony's opinion if the opinion was
reissued taking into account such event.
The Special Committee has informed Tucker Anthony that, as of the date of
this Schedule 14D-9, there has been no change in the terms of the proposed
consideration and there has been no material event that the Special Committee
believes could affect Tucker Anthony's opinion since Tucker Anthony rendered
such opinion.
The full text of the written opinion of Tucker Anthony dated May 5, 2000,
which sets forth the assumptions made, general procedures followed, matters
considered and limitations on the scope of review undertaken by Tucker Anthony
in rendering its opinion, is attached as Schedule I to this Schedule 14D-9 and
is incorporated herein by reference. The Tucker Anthony opinion is directed to
the Special Committee and relates only to the fairness, from a financial point
of view, of the Exchange Ratio to the Public Shareholders, and does not
constitute a recommendation to any of the Public Shareholders as to whether or
not they should accept the Offer and tender their Shares. The summary of
Tucker Anthony's opinion set forth below is qualified in its entirety by
reference to the full text of the written opinion attached hereto as Schedule
I. Public Shareholders are urged to read the entire opinion carefully.
11
<PAGE>
In conducting its investigation and analysis and in arriving at its
opinion, Tucker Anthony reviewed the information and took into account such
financial and economic factors as it deemed relevant and material under the
circumstances. The material actions Tucker Anthony undertook in its analysis
were as follows:
. reviewed internal financial information concerning (including certain
financial projections, as described below) the business and operations
of the Company, the Purchaser, Thermo Fibertek Inc. ("Fibertek"), and
the Purchaser's biomedical products business ("Biomedical") that was
furnished to Tucker Anthony by the respective management of those
organizations for purposes of its analysis, as well as publicly
available information, including but not limited to, the Company's and
the Purchaser's recent filings with the Commission;
. reviewed the Offer as set forth in the Registration Statement;
. reviewed the Purchaser's assets to be sold and its management's
estimates of the aggregate net cash to be received;
. compared the historical market prices and trading activity of the Common
Stock and the Purchaser Common Stock with those of other publicly traded
companies that Tucker Anthony deemed relevant;
. compared the financial position and operating results of the Company,
the Purchaser, Fibertek and Biomedical with those of other publicly
traded companies that Tucker Anthony deemed relevant;
. compared the proposed financial terms of the Offer with the nature and
financial terms of acquisitions of remaining minority interests,
purchases of minority interests and other merger and acquisition
transactions and other business combinations that Tucker Anthony deemed
relevant; and
. held discussions with members of the Company's, the Purchaser's,
Fibertek's and Biomedical's respective senior management concerning each
organization's historical and current financial condition and operating
results, as well as the future prospects of each entity.
Tucker Anthony also reviewed relevant industry market research studies,
company research reports, key economic and market indicators, and general
stock market performance. Other than as set forth above, Tucker Anthony did
not review any additional information in preparing its opinion that,
independently, was material to its analysis. As a part of its engagement,
Tucker Anthony was not requested to, and did not, solicit third party
indications of interest in a potential acquisition of the Company. The Special
Committee did not place any limitation upon Tucker Anthony with respect to the
procedures followed or factors considered by Tucker Anthony in rendering its
opinion.
In arriving at its opinion, Tucker Anthony assumed and relied upon the
accuracy and completeness of all of the financial and other information that
was publicly available or provided to Tucker Anthony by, or on behalf of, the
Company and the Purchaser, and did not independently verify that information.
Tucker Anthony assumed, with the Special Committee's consent, that:
. all material assets and liabilities (contingent or otherwise, known or
unknown) of the Company and the Purchaser are as set forth in their
respective financial statements;
. obtaining all regulatory and other approvals and third party consents
required for consummation of the Offer and the Merger would not have a
material effect on the anticipated benefits of the transaction; and
. the Offer and the Merger would be consummated in accordance with the
terms set forth in the Prospectus without any amendment thereto and
without waiver by the Company or the Purchaser of any of the conditions
to their respective obligations thereunder.
12
<PAGE>
In performing its analysis, Tucker Anthony was given access to and relied
upon financial projections for fiscal 2000 and made certain financial
assumptions for fiscal 2001, 2002, 2003, 2004, and 2005 for each of the
Company, the Purchaser, Fibertek and Biomedical based on discussions with
management of these companies and organizations (collectively the
"Projections"). Tucker Anthony assumed that the Projections examined by it
were reasonably prepared based upon the best available estimates and good
faith judgments of the senior management of each organization as to the future
performance of such organization. For information concerning the Projections,
see "Financial Projections" below on pages 22 through 23. Tucker Anthony's
opinion did not predict or take into account any possible economic, monetary
or other changes which may occur, or information which may become available,
after the date of the opinion. Furthermore, Tucker Anthony expressed no
opinion as to the price or trading range at which any of the Company's or the
Purchaser's securities (including the Common Stock and the Purchaser Common
Stock) will trade following the date of the opinion.
The following is a summary of the material financial analyses performed by
Tucker Anthony in connection with rendering its opinion.
Implied Historical Exchange Ratio Analysis. Tucker Anthony performed an
analysis of the implied historical exchange ratio based on the closing market
price per share of the Common Stock relative to the closing market price per
share of Purchaser Common Stock for each trading day from January 29, 1999 to
March 7, 2000. Tucker Anthony noted that the Purchaser made a public
announcement regarding its reorganization with respect to the Company on
January 31, 2000. Furthermore, the Purchaser announced the Exchange Ratio on
March 8, 2000. The following chart presents these historical share prices:
[Included is a chart presenting a graph of the historical stock prices of Common
Stock and Purchaser Common Stock from January 29, 1999 to March 7, 2000.
Included are the words: Historical Stock Prices of Thermo Instruments Systems
Inc. and Thermo Electron Corporation January 29, 1999 to March 7, 2000; Thermo
Instrument Systems Inc.; -- Thermo Electron Corporation January 28, 2000;
announcement of Thermo Electron restructuring plan.]
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Actual Stock Price Comparison Graph
Daily: January 29, 1999 to March 7, 2000
- --------------------------------------------------------------------------------------------------
Date Thermo Instrument Systems, Inc. Thermo Electron Corp.
<S> <C> <C>
1/29/99 16.625 16.63
2/1/99 17 16.63
2/2/99 16.6875 16.31
2/3/99 16.8125 16.5
2/4/99 17.0625 16
2/5/99 17.0625 15.75
2/8/99 17.0625 15.5
2/9/99 17 15.13
2/10/99 17.0625 14.94
2/11/99 17.0625 15.06
2/12/99 17 14.94
2/16/99 16.5 14.5
2/17/99 16.0625 13.75
2/18/99 16 13.75
2/19/99 16.0625 14
2/22/99 15.6875 14
2/23/99 15.25 13.94
2/24/99 15.3125 13.88
2/25/99 15.25 13.94
2/26/99 14.8125 13.81
3/1/99 14.5625 13.69
3/2/99 14.5 13.69
3/3/99 14.375 13.63
3/4/99 14.5 13.88
3/5/99 14.5 13.94
3/8/99 14.625 14.31
3/9/99 14.5625 13.94
3/10/99 14.5625 14.13
3/11/99 14.875 14.38
3/12/99 14.6875 14.19
3/15/99 14.75 14
3/16/99 14.5625 14.88
3/17/99 14.625 14.5
3/18/99 14.5625 14.13
3/19/99 14.5 14.38
3/22/99 14.125 14.13
3/23/99 13.625 13.75
3/24/99 14.125 13.81
3/25/99 14.25 13.94
3/26/99 14.4375 13.88
3/29/99 14.5 14.06
3/30/99 14.25 13.63
3/31/99 14.4375 13.56
4/1/99 14.3125 13.5
4/5/99 14.125 13.88
4/6/99 13.375 13.88
4/7/99 13.375 13.56
4/8/99 13.375 13.25
4/9/99 13.6875 12.81
4/12/99 13.5625 13.19
4/13/99 12.8125 13.13
4/14/99 12.75 12.75
4/15/99 12.625 12.69
4/16/99 12.6875 14.25
4/19/99 12.625 14.06
4/20/99 12.4375 14.63
4/21/99 12.375 14.69
4/22/99 12.4375 14.56
4/23/99 12.625 14.75
4/26/99 12.4375 15.31
4/27/99 12.5 15
4/28/99 12.625 15
4/29/99 12.5625 15.63
4/30/99 13 16.06
5/3/99 13.5 16.19
5/4/99 13.25 16.25
5/5/99 13.3125 16.75
5/6/99 13.3125 16.56
5/7/99 13.75 17.44
5/10/99 14 18.31
5/11/99 14.5 19.5
5/12/99 14.5 18.94
5/13/99 14.6875 18.69
5/14/99 14.5 18.25
5/17/99 14.3125 18.25
5/18/99 14.25 18.69
5/19/99 15.0625 19
5/20/99 15.3125 19.56
5/21/99 15.5 19.63
5/24/99 15.4375 19.38
5/25/99 14.9375 19.13
5/26/99 14.8125 19.19
5/27/99 14.5 19.06
5/28/99 14.375 19.13
6/1/99 14.125 19
6/2/99 14.375 19
6/3/99 14.875 18.94
6/4/99 14.625 19.44
6/7/99 14.3125 19.38
6/8/99 14.125 19.19
6/9/99 14.3125 18.88
6/10/99 14.625 19.06
6/11/99 14.5625 18.69
6/14/99 14.75 18.5
6/15/99 15 18.69
6/16/99 15.0625 18.75
6/17/99 14.8125 18.81
6/18/99 15 18.88
6/21/99 15.125 18.63
6/22/99 15.0625 18.88
6/23/99 15.1875 18.81
6/24/99 15.1875 18.88
6/25/99 15.0625 19
6/28/99 14.6875 19.25
6/29/99 14.8125 19.44
6/30/99 16 20.06
7/1/99 16.3125 19.88
7/2/99 16.875 19.75
7/6/99 16.875 19.63
7/7/99 16.4375 19.44
7/8/99 16.1875 19.5
7/9/99 16.375 19.44
7/12/99 16.125 19.44
7/13/99 15.5625 19.13
7/14/99 15.5625 19
7/15/99 15.75 19.25
7/16/99 15.6875 19.25
7/19/99 15.625 19.13
7/20/99 15.0625 18.75
7/21/99 15.25 18.88
7/22/99 14.75 18.44
7/23/99 14.375 18.44
7/26/99 14.375 18.06
7/27/99 14.375 18.06
7/28/99 14.4375 17.75
7/29/99 14.25 17.63
7/30/99 14.5 17.19
8/2/99 13.9375 16.94
8/3/99 13.375 16.88
8/4/99 13.4375 16.69
8/5/99 13.375 16.69
8/6/99 13.5625 16.63
8/9/99 13.625 16.94
8/10/99 13.5625 16.75
8/11/99 13.625 16.25
8/12/99 13.625 16.56
8/13/99 13.6875 16.69
8/16/99 13.6875 16.88
8/17/99 13.625 16.38
8/18/99 13.375 16.19
8/19/99 13.5625 16.13
8/20/99 13.5 16
8/23/99 13.5 16.06
8/24/99 13 16.06
8/25/99 12.1875 16.81
8/26/99 11.9375 16.31
8/27/99 11.9375 15.88
8/30/99 11.125 15.56
8/31/99 11.125 15.88
9/1/99 11.0625 15.75
9/2/99 11.125 15.88
9/3/99 10.75 15.88
9/7/99 10.5625 15.94
9/8/99 11.0625 15.75
9/9/99 12.4375 15.75
9/10/99 12 15.88
9/13/99 11.9375 15.63
9/14/99 11.75 15.38
9/15/99 11.625 15
9/16/99 11.5 15.13
9/17/99 11.625 15.13
9/20/99 11.6875 14.88
9/21/99 11.8125 14.63
9/22/99 12 14.31
9/23/99 11.625 14.31
9/24/99 11.6875 13.5
9/27/99 11.4375 13.69
9/28/99 11.0625 13.44
9/29/99 10.9375 13.44
9/30/99 10.6875 13.44
10/1/99 10.625 13.56
10/4/99 10.5625 13.94
10/5/99 10.625 13.63
10/6/99 10.5 13.94
10/7/99 10.25 13.75
10/8/99 10.5625 13.94
10/11/99 10.75 13.94
10/12/99 10.625 13.69
10/13/99 10.375 13.63
10/14/99 10.125 13.38
10/15/99 9.8125 13.31
10/18/99 9.3125 13.44
10/19/99 9.4375 13.06
10/20/99 9.1875 13.25
10/21/99 8.25 13.25
10/22/99 9 13.25
10/25/99 8.9375 13.19
10/26/99 9.5625 13.25
10/27/99 9.4375 13
10/28/99 10.0625 13.31
10/29/99 9.5 13.5
11/1/99 9.875 13.63
11/2/99 10.3125 14.06
11/3/99 10.625 14.13
11/4/99 10.75 14.13
11/5/99 10.5 14
11/8/99 10.5625 14
11/9/99 10.8125 13.88
11/10/99 10.9375 13.94
11/11/99 10.875 13.75
11/12/99 11.0625 13.75
11/15/99 11 13.63
11/16/99 10.875 13.63
11/17/99 11 13.69
11/18/99 11.25 14.31
11/19/99 11.6875 14.44
11/22/99 11.6875 14.5
11/23/99 11.6875 14.75
11/24/99 11.6875 14.75
11/26/99 11.875 14.63
11/29/99 11.625 14.69
11/30/99 11.8125 15
12/1/99 12.25 15.5
12/2/99 12 15.5
12/3/99 11.875 15.75
12/6/99 11.6875 15.88
12/7/99 11.5 15.81
12/8/99 11.375 15.5
12/9/99 11.25 15.5
12/10/99 11.4375 15.5
12/13/99 11.5625 15.19
12/14/99 11.875 15.44
12/15/99 11.9375 15
12/16/99 12.5 15
12/17/99 12.25 14.44
12/20/99 11.625 14
12/21/99 11.125 14
12/22/99 11.25 14.13
12/23/99 11.1875 14.94
12/27/99 11.0625 15.13
12/28/99 11.125 15
12/29/99 11.125 15.13
12/30/99 11.0625 15.06
12/31/99 11.125 15
1/3/00 11.125 15
1/4/00 10.5 14.44
1/5/00 10.5 14.56
1/6/00 11.125 14.56
1/7/00 11 14.75
1/10/00 11 14.63
1/11/00 11 14.75
1/12/00 11.375 14.38
1/13/00 11.875 14.88
1/14/00 11.875 14.63
1/18/00 13.125 14.44
1/19/00 13.375 14.25
1/20/00 15.3125 14.5
1/21/00 16.625 14.44
1/24/00 15.8125 14.63
1/25/00 16.6875 14.75
1/26/00 15.3125 15.56
1/27/00 15.5 16.5
1/28/00 15.6875 16.25
1/31/00 16 17.31
2/1/00 16.0625 17.69
2/2/00 15.8125 17.38
2/3/00 16.3125 17.56
2/4/00 16.875 17.44
2/7/00 16.875 17.44
2/8/00 16.75 16.88
2/9/00 16.5 16.56
2/10/00 16.4375 16.25
2/11/00 19.375 16.13
2/14/00 18.5 16.38
2/15/00 18.1875 16.63
2/16/00 18.25 16.44
2/17/00 18.3125 15.94
2/18/00 18.4375 15.69
2/22/00 16.625 16.5
2/23/00 16.9375 16.38
2/24/00 17.0625 16.06
2/25/00 16.75 15.56
2/28/00 16.25 15.63
2/29/00 16.0625 15.63
3/1/00 16.375 17.25
3/2/00 18.625 20.13
3/3/00 19.5 21.94
3/6/00 19.375 21.56
3/7/00 19.9375 24
</TABLE>
The following chart and table present the historical relationship of the
stock prices of the Company and the Purchaser from January 29, 1999 to March
7, 2000. The relationship in the chart is based on the daily closing stock
price of each company. This analysis yields daily implied historical exchange
ratios during this period that compare to the Exchange Ratio of 0.85. The
table highlights the historical exchange ratio statistics for eight periods in
time: twelve, nine, six, and three months prior to both the announcement of
the Purchaser's restructuring on January 31, 2000 and the announcement of the
Exchange Ratio on March 8, 2000.
13
<PAGE>
[Included is a chart presenting a graph of the historical relationship of the
prices of Common Stock and Purchaser Common Stock from January 29, 1999 to March
7, 2000 based on the daily closing stock price of the Company and the Purchaser.
Included are the words: Implied Historical Ratio of Daily Share Prices, January
29, 1999 to March 7, 2000; Ratio of THI/TMO Stock Prices; Exchange Ratio 0.85;
January 28, 2000 announcement of Thermo Electron restructuring plan; THI =
Thermo Systems Inc.; TMO = Thermo Electron Corporation]
[GRAPH APPEARS HERE]
Stock Price Ratio Graph
Daily: January 29, 1999 to March 7, 2000
- -------------------------------------------------------------------------------
Date Ratio of THI/TMO Exchange Ratio 0.85
1/29/99 1 0.85
2/1/99 1.022556391 0.85
2/2/99 1.022988506 0.85
2/3/99 1.018939394 0.85
2/4/99 1.06640625 0.85
2/5/99 1.083333333 0.85
2/8/99 1.100806452 0.85
2/9/99 1.123966942 0.85
2/10/99 1.142259414 0.85
2/11/99 1.132780083 0.85
2/12/99 1.138075314 0.85
2/16/99 1.137931034 0.85
2/17/99 1.168181818 0.85
2/18/99 1.163636364 0.85
2/19/99 1.147321429 0.85
2/22/99 1.120535714 0.85
2/23/99 1.094170404 0.85
2/24/99 1.103603604 0.85
2/25/99 1.094170404 0.85
2/26/99 1.07239819 0.85
3/1/99 1.063926941 0.85
3/2/99 1.059360731 0.85
3/3/99 1.055045872 0.85
3/4/99 1.045045045 0.85
3/5/99 1.040358744 0.85
3/8/99 1.021834061 0.85
3/9/99 1.044843049 0.85
3/10/99 1.030973451 0.85
3/11/99 1.034782609 0.85
3/12/99 1.035242291 0.85
3/15/99 1.053571429 0.85
3/16/99 0.978991597 0.85
3/17/99 1.00862069 0.85
3/18/99 1.030973451 0.85
3/19/99 1.008695652 0.85
3/22/99 1 0.85
3/23/99 0.990909091 0.85
3/24/99 1.022624434 0.85
3/25/99 1.022421525 0.85
3/26/99 1.040540541 0.85
3/29/99 1.031111111 0.85
3/30/99 1.04587156 0.85
3/31/99 1.064516129 0.85
4/1/99 1.060185185 0.85
4/5/99 1.018018018 0.85
4/6/99 0.963963964 0.85
4/7/99 0.986175115 0.85
4/8/99 1.009433962 0.85
4/9/99 1.068292683 0.85
4/12/99 1.028436019 0.85
4/13/99 0.976190476 0.85
4/14/99 1 0.85
4/15/99 0.995073892 0.85
4/16/99 0.890350877 0.85
4/19/99 0.897777778 0.85
4/20/99 0.85042735 0.85
4/21/99 0.842553191 0.85
4/22/99 0.854077253 0.85
4/23/99 0.855932203 0.85
4/26/99 0.812244898 0.85
4/27/99 0.833333333 0.85
4/28/99 0.841666667 0.85
4/29/99 0.804 0.85
4/30/99 0.809338521 0.85
5/3/99 0.833976834 0.85
5/4/99 0.815384615 0.85
5/5/99 0.794776119 0.85
5/6/99 0.803773585 0.85
5/7/99 0.788530466 0.85
5/10/99 0.764505119 0.85
5/11/99 0.743589744 0.85
5/12/99 0.765676568 0.85
5/13/99 0.785953177 0.85
5/14/99 0.794520548 0.85
5/17/99 0.784246575 0.85
5/18/99 0.762541806 0.85
5/19/99 0.792763158 0.85
5/20/99 0.782747604 0.85
5/21/99 0.789808917 0.85
5/24/99 0.796774194 0.85
5/25/99 0.781045752 0.85
5/26/99 0.771986971 0.85
5/27/99 0.760655738 0.85
5/28/99 0.751633987 0.85
6/1/99 0.743421053 0.85
6/2/99 0.756578947 0.85
6/3/99 0.785478548 0.85
6/4/99 0.752411576 0.85
6/7/99 0.738709677 0.85
6/8/99 0.736156352 0.85
6/9/99 0.758278146 0.85
6/10/99 0.767213115 0.85
6/11/99 0.779264214 0.85
6/14/99 0.797297297 0.85
6/15/99 0.802675585 0.85
6/16/99 0.803333333 0.85
6/17/99 0.787375415 0.85
6/18/99 0.794701987 0.85
6/21/99 0.812080537 0.85
6/22/99 0.798013245 0.85
6/23/99 0.80730897 0.85
6/24/99 0.804635762 0.85
6/25/99 0.792763158 0.85
6/28/99 0.762987013 0.85
6/29/99 0.762057878 0.85
6/30/99 0.797507788 0.85
7/1/99 0.820754717 0.85
7/2/99 0.85443038 0.85
7/6/99 0.859872611 0.85
7/7/99 0.845659164 0.85
7/8/99 0.830128205 0.85
7/9/99 0.84244373 0.85
7/12/99 0.829581994 0.85
7/13/99 0.81372549 0.85
7/14/99 0.819078947 0.85
7/15/99 0.818181818 0.85
7/16/99 0.814935065 0.85
7/19/99 0.816993464 0.85
7/20/99 0.803333333 0.85
7/21/99 0.80794702 0.85
7/22/99 0.8 0.85
7/23/99 0.779661017 0.85
7/26/99 0.795847751 0.85
7/27/99 0.795847751 0.85
7/28/99 0.813380282 0.85
7/29/99 0.808510638 0.85
7/30/99 0.843636364 0.85
8/2/99 0.822878229 0.85
8/3/99 0.792592593 0.85
8/4/99 0.805243446 0.85
8/5/99 0.801498127 0.85
8/6/99 0.815789474 0.85
8/9/99 0.804428044 0.85
8/10/99 0.809701493 0.85
8/11/99 0.838461538 0.85
8/12/99 0.822641509 0.85
8/13/99 0.820224719 0.85
8/16/99 0.811111111 0.85
8/17/99 0.832061069 0.85
8/18/99 0.826254826 0.85
8/19/99 0.841085271 0.85
8/20/99 0.84375 0.85
8/23/99 0.840466926 0.85
8/24/99 0.809338521 0.85
8/25/99 0.724907063 0.85
8/26/99 0.731800766 0.85
8/27/99 0.751968504 0.85
8/30/99 0.714859438 0.85
8/31/99 0.700787402 0.85
9/1/99 0.702380952 0.85
9/2/99 0.700787402 0.85
9/3/99 0.677165354 0.85
9/7/99 0.662745098 0.85
9/8/99 0.702380952 0.85
9/9/99 0.78968254 0.85
9/10/99 0.755905512 0.85
9/13/99 0.764 0.85
9/14/99 0.764227642 0.85
9/15/99 0.775 0.85
9/16/99 0.760330579 0.85
9/17/99 0.768595041 0.85
9/20/99 0.785714286 0.85
9/21/99 0.807692308 0.85
9/22/99 0.838427948 0.85
9/23/99 0.812227074 0.85
9/24/99 0.865740741 0.85
9/27/99 0.835616438 0.85
9/28/99 0.823255814 0.85
9/29/99 0.813953488 0.85
9/30/99 0.795348837 0.85
10/1/99 0.783410138 0.85
10/4/99 0.757847534 0.85
10/5/99 0.779816514 0.85
10/6/99 0.753363229 0.85
10/7/99 0.745454545 0.85
10/8/99 0.757847534 0.85
10/11/99 0.771300448 0.85
10/12/99 0.776255708 0.85
10/13/99 0.76146789 0.85
10/14/99 0.757009346 0.85
10/15/99 0.737089202 0.85
10/18/99 0.693023256 0.85
10/19/99 0.722488038 0.85
10/20/99 0.693396226 0.85
10/21/99 0.622641509 0.85
10/22/99 0.679245283 0.85
10/25/99 0.677725118 0.85
10/26/99 0.721698113 0.85
10/27/99 0.725961538 0.85
10/28/99 0.755868545 0.85
10/29/99 0.703703704 0.85
11/1/99 0.724770642 0.85
11/2/99 0.733333333 0.85
11/3/99 0.752212389 0.85
11/4/99 0.761061947 0.85
11/5/99 0.75 0.85
11/8/99 0.754464286 0.85
11/9/99 0.779279279 0.85
11/10/99 0.784753363 0.85
11/11/99 0.790909091 0.85
11/12/99 0.804545455 0.85
11/15/99 0.80733945 0.85
11/16/99 0.798165138 0.85
11/17/99 0.803652968 0.85
11/18/99 0.786026201 0.85
11/19/99 0.80952381 0.85
11/22/99 0.806034483 0.85
11/23/99 0.792372881 0.85
11/24/99 0.792372881 0.85
11/26/99 0.811965812 0.85
11/29/99 0.791489362 0.85
11/30/99 0.7875 0.85
12/1/99 0.790322581 0.85
12/2/99 0.774193548 0.85
12/3/99 0.753968254 0.85
12/6/99 0.736220472 0.85
12/7/99 0.727272727 0.85
12/8/99 0.733870968 0.85
12/9/99 0.725806452 0.85
12/10/99 0.737903226 0.85
12/13/99 0.761316872 0.85
12/14/99 0.769230769 0.85
12/15/99 0.795833333 0.85
12/16/99 0.833333333 0.85
12/17/99 0.848484848 0.85
12/20/99 0.830357143 0.85
12/21/99 0.794642857 0.85
12/22/99 0.796460177 0.85
12/23/99 0.748953975 0.85
12/27/99 0.731404959 0.85
12/28/99 0.741666667 0.85
12/29/99 0.73553719 0.85
12/30/99 0.734439834 0.85
12/31/99 0.741666667 0.85
1/3/00 0.741666667 0.85
1/4/00 0.727272727 0.85
1/5/00 0.721030043 0.85
1/6/00 0.763948498 0.85
1/7/00 0.745762712 0.85
1/10/00 0.752136752 0.85
1/11/00 0.745762712 0.85
1/12/00 0.791304348 0.85
1/13/00 0.798319328 0.85
1/14/00 0.811965812 0.85
1/18/00 0.909090909 0.85
1/19/00 0.938596491 0.85
1/20/00 1.056034483 0.85
1/21/00 1.151515152 0.85
1/24/00 1.081196581 0.85
1/25/00 1.131355932 0.85
1/26/00 0.983935743 0.85
1/27/00 0.939393939 0.85
1/28/00 0.965384615 0.85
1/31/00 0.924187726 0.85
2/1/00 0.908127208 0.85
2/2/00 0.910071942 0.85
2/3/00 0.928825623 0.85
2/4/00 0.967741935 0.85
2/7/00 0.967741935 0.85
2/8/00 0.992592593 0.85
2/9/00 0.996226415 0.85
2/10/00 1.011538462 0.85
2/11/00 1.201550388 0.85
2/14/00 1.129770992 0.85
2/15/00 1.093984962 0.85
2/16/00 1.11026616 0.85
2/17/00 1.149019608 0.85
2/18/00 1.175298805 0.85
2/22/00 1.007575758 0.85
2/23/00 1.034351145 0.85
2/24/00 1.062256809 0.85
2/25/00 1.076305221 0.85
2/28/00 1.04 0.85
2/29/00 1.028 0.85
3/1/00 0.949275362 0.85
3/2/00 0.925465839 0.85
3/3/00 0.888888889 0.85
3/6/00 0.898550725 0.85
3/7/00 0.830729167 0.85
Stock Price Ratio Analysis Table
Ratio of THI Share Price to TMO Share Price
<TABLE>
<CAPTION>
12 Month 9 Month 6 Month 3 Month
------------------------------------------------
<S> <C> <C> <C> <C>
Periods ending on March 7,
2000
------------------------------------------------
Weighted Avg. 0.82 0.80 0.80 0.89
------------------------------------------------
Median 0.80 0.80 0.79 0.91
------------------------------------------------
Mean 0.84 0.82 0.83 0.90
------------------------------------------------
High 1.20 1.20 1.20 1.20
------------------------------------------------
Low 0.62 0.62 0.62 0.72
------------------------------------------------
Periods ending on January 28,
2000
------------------------------------------------
Weighted Avg. 0.86 0.78 0.78 0.80
------------------------------------------------
Median 0.80 0.79 0.78 0.79
------------------------------------------------
Mean 0.85 0.79 0.79 0.81
------------------------------------------------
High 1.17 1.15 1.15 1.15
------------------------------------------------
Low 0.62 0.62 0.62 0.70
</TABLE>
An analysis of the exchange ratios for the eight periods yielded a weighted
average implied historical exchange ratio ranging from 0.78 to 0.89, with all
but two periods (the twelve months prior to the restructuring announcement and
the three months prior to the announcement of the Exchange Ratio) being below
the Exchange Ratio. The high and low single day implied historical exchange
ratios during the period from January 29, 1999 to March 7, 2000 were 1.20 and
0.62, respectively.
14
<PAGE>
Analysis of the Purchaser's Valuation Premiums. Tucker Anthony calculated
the implied equity value per share reflected by the Exchange Ratio relating to
the Offer to be $20.40 for each Share, obtained by multiplying the Exchange
Ratio of 0.85 by the closing price per share of the Purchaser Common Stock of
$24.00 on March 7, 2000. Tucker Anthony compared the premium offered to
holders of Common Stock represented by the implied equity value per Share of
$20.40 to the closing prices for the Common Stock on the dates four weeks
prior, one week prior and one day prior to the March 8, 2000 public
announcement of the Exchange Ratio. Tucker Anthony calculated that the implied
equity value per Share represented the following premiums to holders of Common
Stock:
. A premium of 23.6% over the closing price of $16.50 for the Common Stock
on February 9, 2000, four weeks prior to the announcement of the
Exchange Ratio;
. A premium of 27.0% over the closing price of $16.06 for the Common Stock
on February 29, 2000, one week prior to the announcement of the Exchange
Ratio; and
. A premium of 2.3% over the closing price of $19.94 for the Common Stock
on March 7, 2000, one day prior to the announcement of the Exchange
Ratio.
Tucker Anthony also performed an analysis of the implied equity values
based on comparable acquisition premiums for minority interest and remaining
interest transactions, based upon the Exchange Ratio of 0.85 and the closing
market price per share of the Common Stock and the Purchaser Common Stock.
Tucker Anthony reviewed comparable transactions in the following categories:
(i) 31 acquisitions between January 1, 1994 and April 24, 2000 of a minority
interest (ranging from 10.0% to 29.5%) in a public company that remained a
public company following the transaction; and (ii) 16 acquisitions between
January 1, 1994 and April 24, 2000 of a remaining minority interest (ranging
from 8.0% to 35.1%) in a public company that went private as a result of the
transaction. Tucker Anthony noted that the transaction contemplated by the
Offer represents an 11.4% remaining minority interest transaction. Tucker
Anthony further noted that an acquisition of a minority interest or a
remaining minority interest differs from an acquisition of a 100% interest. In
a 100% acquisition, the acquiring company purchases control of the subject
company and, therefore, the financial terms of the transaction reflect a
control premium. The acquisition of a minority interest in, or the remaining
minority interest of, a public company does not generally involve a control
premium. However, unlike a transaction involving the acquisition of a minority
interest, in a transaction involving the acquisition of a remaining minority
interest, stockholders do not have the alternative to retain their publicly
traded stock in the subject company. Accordingly, premiums paid in remaining
interest transactions generally are greater than premiums paid in minority
interest transactions. Tucker Anthony's analysis produced the following median
premiums over the four-weeks' prior stock price in the comparable transactions
as compared to the 23.6% premium in the transaction contemplated by the Offer:
. the median premium over the stock price four weeks prior to the
announcement of the 31 acquisitions of a minority interest in a public
company was 12.4%, with a range of 1.6% to 30.1%; and
. the median premium over the stock price four weeks prior to the
announcement of the 16 remaining minority interest transactions was
20.5%, with a range of 1.1% to 64.8%. Tucker Anthony again noted that
these transactions are most comparable to the transaction contemplated
by the Offer.
Analysis of Company Valuation Multiples. Tucker Anthony calculated the
implied enterprise value of the Company as a result of the Offer to be $2,916
million. The implied enterprise value was obtained by multiplying the implied
equity value per Share of $20.40 one day prior to the announcement of the
Exchange Ratio by the total number of outstanding Shares of Common Stock,
resulting in a value of $2,455 million, and adding the Company's net debt of
$461 million (the Company's debt less cash as of December 31, 1999 net of a
conversion of a $140 million senior convertible note in February 2000). Tucker
Anthony calculated multiples of the Company's implied enterprise value to its
latest twelve month ("LTM") sales ("Sales"), its earnings before interest,
taxes, depreciation and amortization ("EBITDA") and its earnings before income
and taxes ("EBIT"). The calculations resulted in the following:
. The multiple of the Company's implied enterprise value to its LTM Sales
was 1.4x;
. The multiple of the Company's implied enterprise value to its LTM EBITDA
was 9.7x; and
15
<PAGE>
. The multiple of the Company's implied enterprise value to its LTM EBIT
was 13.3x.
Analysis of Selected Comparable Merger and Acquisition Transactions. Tucker
Anthony reviewed three sets of selected acquisition transactions which Tucker
Anthony deemed relevant to this transaction. The transactions for each of the
three sets were chosen based on a review of the acquired companies that
possessed general business, operating and financial characteristics
representative of companies in the industries in which the Company, the
Purchaser, Fibertek and Biomedical operate. Tucker Anthony noted that none of
the selected transactions reviewed was identical to this transaction and that,
accordingly, the analysis of comparable acquisition transactions necessarily
involves complex consideration and judgments concerning differences in
financial and operating characteristics of the Company, the Purchaser,
Fibertek and Biomedical and other factors that would affect the acquisition
value of comparable transactions including, among others, the general market
conditions prevailing in the equity capital markets at the time of such
transactions. For each comparable transaction, Tucker Anthony calculated
multiples of enterprise value to LTM Sales, LTM EBITDA and LTM EBIT ending
December 31, 1999.
For valuing the Offer:
. The multiple of implied enterprise value to LTM Sales in this
transaction is 1.4x. This compares to the median multiple for the
comparable merger and acquisition transactions of 1.3x;
. The multiple of implied enterprise value to LTM EBITDA in this
transaction is 9.7x. This compares to the median multiple for the
comparable merger and acquisition transactions of 10.5x; and
. The multiple of implied enterprise value to LTM EBIT in this transaction
is 13.3x. This compares to the median multiple for the comparable merger
and acquisition transactions of 12.9x.
For valuing the Company:
. The implied enterprise value of the Company based on the median EBIT
multiple for the comparable merger and acquisition transactions of
12.9x, December 31, 1999 year end EBIT of $219 million and cash and debt
balances from December 31, 1999 of $442 million (net of a conversion of
a $140 million senior convertible note in February 2000) and $903
million, respectively, was $18.04 per Share. Tucker Anthony compared
this amount to the implied equity value per Share reflected by the
Exchange Ratio of $20.40 as of March 7, 2000, the day prior to the
Purchaser's announcement of the Exchange Ratio.
For valuing the Purchaser's on-going operations:
. The implied enterprise value of the Purchaser based on the median EBIT
multiple for the comparable merger and acquisition transactions of
12.9x, December 31, 1999 year end EBIT of $249 million and cash and debt
balances from December 31, 1999 of $1,192 million and $1,707 million,
respectively, was $14.91 per share of the Purchaser Common Stock.
For valuing Fibertek:
. The implied enterprise value of Fibertek based on the median EBIT
multiple for the comparable merger and acquisition transactions of
16.6x, December 31, 1999 year end EBIT of $25 million and cash and debt
balances from December 31, 1999 of $179 million and $156 million,
respectively, was $2.18 per share of the Purchaser Common Stock.
For valuing Biomedical:
. The implied enterprise value of Biomedical based on the median EBIT
multiple for the comparable merger and acquisition transactions of
15.7x, December 31, 1999 year end EBIT of $51 million and cash and debt
balances from December 31, 1999 of $4 million and $53 million,
respectively, was $4.19 per share of Purchaser Common Stock.
The sum of these per share implied enterprise values for each of the
Purchaser, Fibertek and Biomedical is $21.28 per share. This compares to the
implied enterprise value for the Company of $18.04 set forth above, which
results in an implied exchange ratio of 0.848 as compared to the Exchange
Ratio of 0.85.
16
<PAGE>
Discounted Cash Flow Analysis. Tucker Anthony performed a discounted cash
flow ("DCF") analysis of the Company based upon the Projections. The
Projections suggested that the Company would achieve a 20% aggregate revenue
growth rate from internal growth and acquisitions for the years 2001 through
2005 and reflect the divestiture of certain non-core businesses in 2000. In
such analysis, Tucker Anthony assumed terminal value multiple range of 12.4x
to 13.4x EBIT in 2005 (such range was determined based upon multiples of
selected merger and acquisition transactions) and discount rates in the range
of 12.1% to 13.1%. The discount rates used by Tucker Anthony were selected
based upon its calculation of the weighted average cost of capital ("WACC") of
the Company. Such analysis produced present values of the Common Stock ranging
from $30.64 to $35.37 per Share.
Tucker Anthony compared the Projections, together with the associated
assumptions, to the Company's actual historical results. Tucker Anthony noted
that the projected internal growth and profit margins were substantially
greater than those realized in historical periods. As a result, Tucker Anthony
performed an adjusted DCF analysis of the Company taking into account the
possibility that the Company may not be able to achieve the growth and
profitability assumptions indicated by the Projections. Tucker Anthony's
adjusted case assumptions presumed that the Company would achieve an internal
revenue growth rate of 4%, as compared to the 7% internal revenue growth rate
in the Projections. These future internal revenue growth rates compared to 3%
actual internal revenue growth in 1996, -2% actual internal revenue growth in
1997, -6% actual internal revenue growth in 1998, and -3% actual internal
revenue growth in 1999. Tucker Anthony noted that the Company's historical
gross margins averaged approximately 46% for the years 1996 through 1999 and
adjusted the Projections to conform to the historical level. Similarly, Tucker
Anthony noted that the Company's historical EBIT margins averaged
approximately 12% for the years 1996 through 1999, compared to a range of 46%
to 48% in the Projections, and adjusted the Projections to conform to the
historical level. The acquisition revenue in the adjusted case was also
adjusted to 50% of the levels assumed in the Projections. Tucker Anthony also
assumed that the Company sold certain non-core assets in 2000 which had the
effect of increasing the value of such assets in the analysis. The aggregate
effect of these adjustments was to reduce the growth in the Company's EBITDA
during the period of the Projections from 20.8% to 9.6% in the adjusted case,
compared to the Company's actual historic EBITDA growth rate of 4.3% in the
most recent three-year period ending December 31, 1999. By applying the same
terminal value multiples and discount rates, this analysis produced present
values of the Common Stock ranging from $20.30 to $22.87.
Tucker Anthony also performed a DCF analysis of the continuing operations
of the Purchaser based upon the Purchaser's management projections and
associated assumptions. The projections for the Purchaser's continuing
operations incorporate the Projections for the Company and also include
projections for Thermo Sentron Inc. ("Thermo Sentron"), Thermedics Detection
Inc. ("Thermedics Detection"), including Orion Research, Inc. ("Orion"), and
the presumed sale of certain non-core businesses to be completed in 2000 and
2001. In such analysis, Tucker Anthony assumed a terminal value multiple range
of 12.4x to 13.4x EBIT in 2005 and discount rates in the range of 11.6% to
12.6%. The discount rates used by Tucker Anthony were selected based upon its
calculation of the WACC of the Purchaser. Such analysis produced present
values of Purchaser Common Stock attributable to its continuing operations
ranging from $24.67 to $28.37 per share.
Tucker Anthony also performed an adjusted DCF analysis of the Purchaser,
incorporating the adjusted case parameters for the Company described above, as
well as the 2000 budget and 2001 to 2005 growth assumptions for Thermo
Sentron, Thermedics Detection, including Orion, and the presumed sale of
certain non-core businesses to be completed in 2000 and 2001. By applying the
same terminal value and discount rates, this analysis produced present values
for the Purchaser's Common Stock attributable to its continuing operations
ranging from $17.31 to $19.46 per share.
Tucker Anthony also performed DCF analyses for both Fibertek and Biomedical
based upon the Projections. In such analysis for Fibertek, Tucker Anthony
assumed terminal value multiples in the range of 16.1x to 17.1x EBIT in the
year 2005 (based upon selected merger and acquisition transactions) and
discount rates in the range of 12.7% to 13.7% (based upon Tucker Anthony's
calculation of the WACC for Fibertek). In such analysis for Biomedical, Tucker
Anthony assumed terminal value multiples in the range of 15.2x to 16.2x EBIT
in 2005 (based upon selected merger and acquisition transactions) and discount
rates in the range of 13.0% to 13.9% (based upon Tucker Anthony's calculation
of the WACC for Biomedical). Such analysis produced present values of
Purchaser Common Stock attributable to its ownership of Fibertek ranging from
$3.84 to $4.22 per share of Purchaser Common Stock. Such analysis produced
present values of Purchaser Common Stock attributable to its ownership of
Biomedical ranging from $4.67 to $5.17 per share.
17
<PAGE>
Tucker Anthony also performed adjusted case DCF analyses for Fibertek and
Biomedical taking into account the possibility that Fibertek and Biomedical
may not be able to achieve the growth and profitability assumptions indicated
by the stand-alone management case projections for those organizations. Again,
Tucker Anthony adjusted the projected gross margins and EBIT margins to
conform to historical levels. By applying the same terminal value multiples
and discount rates, Tucker Anthony's analysis produced present values ranging
from $3.03 to $3.32 per share of Purchaser Common Stock attributable to its
ownership of Fibertek and present values ranging from $4.19 to $4.65 per share
of Purchaser Common Stock attributable to its ownership of Biomedical.
Tucker Anthony then totaled the values of the adjusted case analyses for
the Purchaser, Fibertek, and Biomedical to arrive at a range of aggregate
present values per share of Purchaser Common Stock. This calculation yielded a
range of aggregate present values for the adjusted case analysis of $24.52 to
$27.42 per share of Purchaser Common Stock with which Tucker Anthony compared
to the adjusted case analysis for the Company that yielded present values of
the Common Stock ranging from $20.30 to $22.87 per share. By comparing these
two ranges, Tucker Anthony calculated an average implied exchange ratio of
approximately 0.83. Tucker Anthony compared this average implied exchange
ratio to the 0.85 Exchange Ratio. Furthermore, Tucker Anthony compared the
values derived from its adjusted DCF cases to reference data points in its
analysis of publicly traded companies set forth below, which were consistent
with the values derived from the adjusted DCF cases.
Analysis of Selected Publicly Traded Companies--The Company. Tucker Anthony
reviewed publicly available financial information as of the most recently
reported period and stock market information as of May 1, 2000 for publicly
traded companies that Tucker Anthony deemed relevant to each of the Company's
three business segments: (i) life sciences segment; (ii) measurement and
control segment; and (iii) photonics segment. Tucker Anthony compared the
Company to the following companies:
Life Sciences Segment
<TABLE>
<S> <C>
1) Beckman Coulter, Inc. 2) Becton, Dickinson and Company
3) Bio-Rad Laboratories, Inc. 4) Mettler-Toledo International
5) Waters Corporation Inc.
Measurement and Control Segment
6) Emerson Electric Co. 7) OI Corporation
8) Roper Industries, Inc. 9) Roxboro Group
10) TSI Incorporated 11) Procom Technology, Inc.
12) Storage Computer Corporation
Photonics Segment
13) Coherent, Inc. 14) PerkinElmer, Inc.
15) Newport Corporation 16) Oxford Instruments plc
17) Rheometric Scientific 18) Varian, Inc.
19) Veeco Instruments Inc.
</TABLE>
For each comparable company and the Company, Tucker Anthony calculated
multiples of enterprise value to LTM Sales, LTM EBITDA, and LTM EBIT. Tucker
Anthony weighted the comparable multiples based on each segment's contribution
to 1999 revenue for the Company. The comparable companies produced multiples
and values as follows:
. LTM Sales median multiple for the comparable public companies of 1.6x
compared to 1.5x for the Company.
. LTM EBITDA median multiple for the comparable companies of 13.2x
compared to 10.6x for the Company.
. LTM EBIT median multiple for the comparable companies of 18.5x compared
to 14.6x for the Company.
18
<PAGE>
The closing price on May 1, 2000 for the Common Stock was $17.625. Tucker
Anthony noted that this analysis was conducted after the announcement of the
Exchange Ratio on March 8, 2000 and after the commencement of the Offer on
April 24, 2000. Tucker Anthony believes that the multiples for the Company set
forth above have been substantially influenced by such events and are,
therefore, not significant to the overall analysis.
Analysis of Selected Publicly Traded Companies--The Purchaser. Tucker
Anthony performed a comparable public companies analysis of the Purchaser.
Tucker Anthony noted that each share of Purchaser Common Stock currently
represents an interest in (i) the Purchaser's ownership interest in the
Company together with the other business units that will comprise the
Purchaser's continuing operations; (ii) Fibertek; and (iii) Biomedical.
(i) Continuing Operations. Tucker Anthony reviewed publicly available
financial information as of the most recently reported period and
stock market information as of May 1, 2000 for publicly traded
companies that Tucker Anthony deemed relevant to the going forward
Purchaser business segments: (i) life sciences segment; (ii)
measurement and control segment; and (iii) photonics segment. Tucker
Anthony noted that, in addition to the Company, Thermo Sentron and
Thermedics Detection are part of the Purchaser's continuing operations
and assumed certain non-core businesses would be sold. The comparable
public companies are the same as those used in the Company analysis
because both Thermo Sentron and Thermedics Detection consider their
comparable public companies to be a subset of those used for the
Company. However, the weighting of comparable multiples based on each
segment's contribution to 1999 revenue for the Purchaser differed from
that of the Company due to the inclusion of Thermo Sentron and
Thermedics Detection. Tucker Anthony compared the Purchaser to the
following companies:
Life Sciences Segment
<TABLE>
<S> <C>
1) Beckman Coulter, Inc. 2) Becton, Dickinson and Company
3) Bio-Rad Laboratories, Inc. Inc.
5) Waters Corporation 4) Mettler-Toledo International
Inc.
Measurement and Control Segment
6) Emerson Electric Co. 7) OI Corporation
8) Roper Industries, Inc. 9) Roxboro Group
10) TSI Incorporated 11) Procom Technology, Inc.
12) Storage Computer Corporation
Photonics Segment
13) Coherent, Inc. 14) PerkinElmer, Inc.
15) Newport Corporation 16) Oxford Instruments plc
17) Rheometric Scientific, Inc. 18) Varian, Inc.
19) Veeco Instruments Inc.
</TABLE>
For each comparable company and the Purchaser, Tucker Anthony
calculated multiples of enterprise value to LTM Sales, LTM EBITDA, and
LTM EBIT. Tucker Anthony weighted the comparable multiples based on
each segment's contribution to 1999 revenue for the Purchaser. Included
in the equity value is the net debt reduction estimated by the
Purchaser's management resulting from the sale of non-core businesses.
The comparable companies produced multiples and values as follows:
. LTM Sales median multiple for the comparable public companies of
1.6x compared to 1.7x for the Purchaser.
. LTM EBITDA median multiple for the comparable companies of 12.6x
compared to 11.9x for the Purchaser.
. LTM EBIT median multiple for the comparable companies of 17.7x
compared to 17.3x for the Purchaser.
19
<PAGE>
The closing stock price of the Purchaser Common Stock on May 1, 2000
was $19.375. Tucker Anthony calculated the implied public market value
for the Purchaser's continuing operations by subtracting the calculated
public market values per share, set forth below, attributable to
Fibertek ($2.11) and Biomedical ($3.07) from its stock price. This
resulted in an implied public market value per share for the continuing
operations of $14.20. Tucker Anthony compared this implied value with
the range of value derived in its DCF analysis, set forth above, of the
Purchaser's continuing operations ($24.67 to $28.37) and in its
adjusted case DCF analysis of the continuing operations ($17.31 to
$19.46). Tucker Anthony noted that the mid-point of its DCF analysis
($26.52) represented an 87% premium over the implied public market
value of the continuing operations per share of Purchaser Common Stock
($14.20) compared to the mid-point of the adjusted DCF ($18.39) which
represented a 30% premium over the implied public market value. Tucker
Anthony noted that the 30% premium was consistent with the median four-
week prior premium (32%) in merger and acquisition transactions related
to the Purchaser's continuing operations.
(ii) Fibertek. Tucker Anthony reviewed publicly available financial
information as of the most recently reported period and stock market
information as of May 1, 2000 for publicly traded companies that
Tucker Anthony deemed relevant. Tucker Anthony compared Fibertek to
the following companies:
<TABLE>
<S> <C>
1) Albany International Corp. 2) Emerson Electric Co.
3) Metso Corporation 4) Regal-Beloit Corporation
5) Trex Company, Inc. 6) U.S. Plastic Lumber Corp.
</TABLE>
For each comparable company and Fibertek, Tucker Anthony calculated
multiples of enterprise value to LTM Sales, LTM EBITDA, and LTM EBIT.
The comparable companies produced multiples and values as follows:
. LTM Sales median multiple for the comparable public companies of
1.0x compared to 1.8x for Fibertek.
. LTM EBITDA median multiple for the comparable companies of 7.5x
compared to 12.6x for Fibertek.
. LTM EBIT median multiple for the comparable companies of 9.1x
compared to 17.1x for Fibertek.
As of May 1, 2000, Tucker Anthony calculated the market value of
Fibertek attributable to each share of Purchaser Common Stock to be
$2.11 per share. Tucker Anthony compared this calculated public market
value with the range of value derived in its DCF analysis, set forth
above, of Fibertek ($3.84 to $4.22 per share of Purchaser Common Stock)
and its adjusted case DCF analysis of Fibertek ($3.03 to $3.32 per
share of Purchaser Common Stock). Tucker Anthony noted that the mid-
point of its DCF analysis ($4.03) represented a 91% premium over the
calculated public market value per share of Purchaser Common Stock
($2.11) compared to the mid-point of the adjusted DCF ($3.175) which
represented a 50% premium over the calculated public market value.
Tucker Anthony noted that the 50% premium was consistent with the
median four-week prior premium (40%) in merger and acquisition
transactions related to Fibertek.
(iii) Biomedical. Tucker Anthony reviewed publicly available financial
information as of the most recently reported period and stock market
information as of May 1, 2000 for publicly traded companies that
Tucker Anthony deemed relevant. Tucker Anthony compared Biomedical to
the following companies:
<TABLE>
<S> <C>
</TABLE>
1) Aspect Medical Systems, Inc. 2) Becton, Dickinson and Company
3) Mallinckrodt Inc. 4) Protocol Systems, Inc.
5) ResMed Inc. 6) Respironics, Inc.
7) SpaceLabs Medical, Inc. 8) Vital Signs, Inc.
20
<PAGE>
For each comparable company, Tucker Anthony calculated multiples of
enterprise value to LTM Sales, LTM EBITDA, and LTM EBIT. Tucker Anthony then
calculated the implied enterprise value of Biomedical based on the median of
these comparable group multiples for the LTM period ending December 31, 1999.
The comparable companies produced multiples and values as follows:
. LTM Sales median multiple for the comparable public companies of
1.6x which produced an implied equity value of $2.84 per share of
Purchaser Common Stock attributable to Biomedical.
. LTM EBITDA median multiple for the comparable companies of 9.0x
which produced an implied equity value of $2.91 per share of
Purchaser Common Stock attributable to Biomedical.
. LTM EBIT median multiple for the comparable companies of 13.2x which
produced an implied equity value of $3.46 per share of Purchaser
Common Stock attributable to Biomedical.
Tucker Anthony calculated the average of the three implied public market
values, set forth above, of the Purchaser Common Stock attributable to
Biomedical to be $3.07. Tucker Anthony compared this value with the range of
value derived from its DCF analysis, set forth above, of Biomedical ($4.67 to
$5.17 per share of Purchaser Common Stock) and its adjusted case DCF analysis
of Biomedical ($4.19 to $4.65 per share of Purchaser Common Stock). Tucker
Anthony noted that the mid-point of its DCF analysis ($4.92) represented a 60%
premium over the average implied market value of Biomedical per share of
Purchaser Common Stock ($3.07) compared to the mid-point of the adjusted DCF
analysis ($4.42) which represented a 44% premium over the implied market
value. Tucker Anthony noted that the 44% premium was consistent with the
median four-week prior premium (34%) in merger and acquisition transactions
related to Biomedical.
The foregoing summary does not purport to be a complete description of the
analyses performed by Tucker Anthony. The preparation of a fairness opinion is
a complex process and is not susceptible to partial analysis or summary
description. Tucker Anthony believes that its analyses must be considered as a
whole, and that selecting portions of any such analyses without considering
all analyses and factors would create an incomplete view of the processes
underlying its opinion. Tucker Anthony did not attempt to assign specific
weights to particular analyses. However, there were no specific factors
reviewed by Tucker Anthony that did not support its opinion. Any estimates
contained in Tucker Anthony's analyses are not necessarily indicative of
actual values, which may be significantly more or less favorable than as set
forth therein. Estimates of values of companies do not purport to be
appraisals or necessarily to reflect the prices at which companies may
actually be sold. Because such estimates are inherently subject to
uncertainty, Tucker Anthony does not assume responsibility for their accuracy.
Compensation. Pursuant to the terms of Tucker Anthony's engagement letter
dated as of April 17, 2000 with the Special Committee, the Company paid Tucker
Anthony a retainer fee of $100,000 and a fee of $350,000 for the preparation
and delivery of its written fairness opinion dated May 5, 2000 (which fee was
payable regardless of the conclusions expressed therein). In addition, the
Company has agreed to pay Tucker Anthony an additional $75,000 upon delivery
of any updated fairness opinion if required by a material change to the Offer.
The Company has also agreed to reimburse Tucker Anthony up to $15,000 for its
out-of-pocket expenses, including the reasonable fees and disbursements of its
counsel, arising in connection with its engagement, and to indemnify Tucker
Anthony, its affiliates, and their respective directors, officers, employees
and agents to the fullest extent permitted by law against certain liabilities,
including liabilities under the federal securities law, relating to or arising
out of its engagement, except for liabilities found to have resulted from the
bad faith, gross negligence or intentional or reckless misconduct of Tucker
Anthony.
In the past, Tucker Anthony had not performed investment banking services
for the Company or received any compensation from the Company, other than as
provided for in the engagement letter. In May 1999, Tucker Anthony rendered an
opinion (and was paid a fee of $225,000 for such opinion) to the Special
Committee of the Board of Directors of ThermoSpectra Corporation
("ThermoSpectra") as to the fairness from a financial point of view, of the
consideration to be received by the minority shareholders of ThermoSpectra
pursuant to a proposed merger by and between ThermoSpectra and the Company.
Tucker Anthony has also rendered opinions to the Special Committees of the
Boards or Directors of Thermo BioAnalysis Corporation, ONIX Systems Inc.,
21
<PAGE>
and Metrika Systems Corporation. Such opinions addressed fairness from the
financial point of view of the consideration received by the minority
shareholders of the latter three companies pursuant to a proposed merger by
and between each company and the Company. Tucker Anthony was paid an aggregate
fee of $585,000 for the three opinions.
Financial Projections
Company Projections. The Company does not, as a matter of course, make
public forecasts or projections as to future sales, earnings or other income
statement data, cash flows or balance sheet and financial position
information. The following summary of the Projections for the Company (the
"Company Projections") is included in this Schedule 14D-9 because they were
made available to the Special Committee and Tucker Anthony. The Company
Projections do not reflect any of the effects of the transaction contemplated
by the Offer or other changes that may in the future affect the Company and
its assets, business, operations, properties, policies, corporate structure,
capitalization and management in light of the circumstances then existing.
To the Special Committee's knowledge, the Company Projections were not
prepared with a view toward public disclosure or compliance with published
guidelines of the Commission or the American Institute of Certified Public
Accountants regarding forward-looking information or generally accepted
accounting principles. To the Special Committee's knowledge, neither the
Company's independent auditors, nor any other independent accountants, have
compiled, examined or performed any procedures with respect to the prospective
financial information contained in the Company Projections nor have they
expressed any opinion or given any form of assurance with respect to such
information or its achievability. Furthermore, the Company Projections
necessarily make numerous assumptions, many of which are beyond the control of
the Company and may prove not to have been, or may no longer be, accurate.
Additionally, this information, except as otherwise indicated, does not
reflect revised prospects for the Company's businesses, changes in general
business and economic conditions, or any other transaction or event that has
occurred or that may occur and that was not anticipated at the time such
information was prepared. Accordingly, such information is not necessarily
indicative of current values or future performance, which may be significantly
more or less favorable than as set forth below, and should not be regarded as
a representation that such projections will be achieved.
THE COMPANY PROJECTIONS ARE NOT GUARANTEES OF PERFORMANCE. THEY INVOLVE
RISKS, UNCERTAINTIES AND ASSUMPTIONS. THE FUTURE FINANCIAL RESULTS AND
SHAREHOLDER VALUE OF THE COMPANY MAY MATERIALLY DIFFER FROM THOSE EXPRESSED IN
THE COMPANY PROJECTIONS. MANY OF THE FACTORS THAT WILL DETERMINE THESE RESULTS
AND VALUES ARE BEYOND THE COMPANY'S ABILITY TO CONTROL OR PREDICT.
SHAREHOLDERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE COMPANY
PROJECTIONS. THERE CAN BE NO ASSURANCE THAT THE COMPANY PROJECTIONS WILL BE
REALIZED OR THAT THE COMPANY'S FUTURE FINANCIAL RESULTS WILL NOT MATERIALLY
VARY FROM THE COMPANY PROJECTIONS. THE COMPANY DOES NOT INTEND TO UPDATE OR
REVISE THE COMPANY PROJECTIONS.
The following table also includes, for comparison purposes, certain
selected historical consolidated financial information with respect to the
Company and its subsidiaries excerpted or derived from the audited historical
consolidated financial statements contained in the Company's Annual Report on
Form 10-K, as amended, for its fiscal year ended January 1, 2000 (fiscal
1999). More comprehensive historical financial information is included for
fiscal periods ending on or prior to January 1, 2000 in the Company's Annual
Reports on Form 10-K and Quarterly Reports on Form 10-Q (the "Company
Reports") and in other documents filed by the Company with the Commission, and
the following historical financial information for such periods is qualified
in its entirety by reference to the Company Reports and other documents and
all of the financial information (including any related notes) contained
therein or incorporated therein by reference.
22
<PAGE>
Selected Actual Fiscal 1999 Historical Financial Data and Fiscal 2000
Projections of
Thermo Instrument Systems Inc.
(in thousands)
<TABLE>
<CAPTION>
Fiscal Fiscal
Year 1999 Year 2000
---------- ----------
<S> <C> <C>
Selected Income Statement Data:
Revenues.............................................. $2,093,537 $2,066,919
---------- ----------
Costs and Operating Expenses:
Cost of revenues.................................... 1,136,675 1,099,346
Operating expenses.................................. 737,687 744,793
Restructuring costs, net............................ 1,211 (363)
---------- ----------
1,875,573 1,843,776
---------- ----------
Operating Income...................................... 217,964 223,143
Net Interest/Other Income and Expense................. (38,281) 126,155
---------- ----------
Income Before Provision for Income Taxes and Minority
Interest............................................. 179,683 349,298
Provision for Income Taxes............................ 75,437 159,604
Minority Interest Expense............................. 16,447 13,182
---------- ----------
Net Income............................................ $ 87,799 $ 176,512
========== ==========
Selected Balance Sheet Data:
Accounts Receivable, Net.............................. $ 489,264 $ 439,780
Inventories........................................... 327,901 292,340
Prepaid Income Taxes and Other Current Assets......... 112,907 156,797
---------- ----------
Total Current Assets Excluding Cash and Investments... 930,072 888,917
Property, Plant and Equipment......................... 287,407 280,774
Cost in Excess of Net Assets of Acquired Companies.... $1,066,291 $1,068,290
</TABLE>
23
<PAGE>
Item 5. Persons/Assets Retained, Employed, Compensated or Used.
The Special Committee entered into a letter agreement with Tucker Anthony
dated as of April 17, 2000, pursuant to which the Special Committee engaged
Tucker Anthony to act as its financial advisor in connection with the Offer.
Subject to the terms and conditions of the engagement letter, Tucker Anthony
agreed to act as a financial advisor to the Special Committee and render an
opinion to the Special Committee with regard to the fairness, from a financial
point of view, of the Exchange Ratio to the Public Shareholders. In connection
with the engagement letter, the Company agreed to pay Tucker Anthony an
aggregate fee of $450,000, $100,000 of which was paid upon the execution of
the engagement letter and the balance of which was paid upon the delivery by
Tucker Anthony of the fairness opinion. In addition, the Company agreed to pay
Tucker Anthony an additional $75,000 upon delivery of any updated fairness
opinion if required by a material change to the Prospectus. The Company also
has agreed to reimburse Tucker Anthony up to $15,000 for its reasonable out-
of-pocket expenses incurred in connection with its engagement and to indemnify
Tucker Anthony against certain liabilities incurred in connection with its
engagement, including liabilities under federal securities laws.
The Special Committee also retained Goodwin, Procter & Hoar LLP to act as
its legal advisor in connection with the Offer. Goodwin, Procter & Hoar LLP
also acted as legal advisor to the special committees of ThermoSpectra, ONIX
Systems Inc., Metrika Systems Corporation and Thermo BioAnalysis Corporation
in connection with transactions similar to that of the Offer. See "Item 4--The
Solicitation or Recommendation--Opinion of Financial Advisor."
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person
to make solicitations or recommendations to holders of Shares on the Company's
behalf concerning the Offer.
Item 6. Interest in Securities of the Subject Company.
During the past 60 days no transaction in the Shares has been effected by
the Company, or to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
Item 7. Purposes of the Transaction and Plans or Proposals.
(a) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which
relate to a tender offer or other acquisition of the Company's securities by
the Company, any subsidiary of the Company or any other person.
(b) Except as set forth in Items 3 and 4 above, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction such as a merger or reorganization
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization,
indebtedness or dividend rate or policy of the Company.
(c) Except as set forth in Items 3 and 4 above, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate to or would result in one or more of the events
referred to in this Item 7.
Item 8. Additional Information.
The information contained in the Exhibits referred to in Item 9 below is
incorporated herein by reference.
24
<PAGE>
Item 9. Exhibits.
<TABLE>
<C> <S>
Exhibit 1 Press release issued by the Purchaser on January 31, 2000
(incorporated by reference to Exhibit 99 to the Current Report on
Form 8-K of the Purchaser filed with the Commission on February 1,
2000)
Exhibit 2 Press release issued by the Purchaser on March 8, 2000
(incorporated by reference to the Rule 425 communication filed with
the Commission on March 8, 2000)
Exhibit 3 Press release issued by the Purchaser on April 13, 2000
(incorporated by reference to the Rule 425 communication filed with
the Commission on April 13, 2000)
Exhibit 4 Press release issued by the Purchaser on April 24, 2000
(incorporated by reference to the Rule 425 communication filed with
the Commission on April 24, 2000)
Exhibit 5 Press release issued by the Company on May 5, 2000
Exhibit 6 Prospectus dated April 24, 2000 filed by the Purchaser with the
Commission on April 24, 2000 (incorporated by reference to the
Purchaser's Registration Statement on Form S-4 (File No. 333-35478)
filed with the Commission on April 24, 2000)
Exhibit 7 Letter to Stockholders dated May 5, 2000*
Exhibit 8 Opinion of Tucker Anthony Cleary Gull (included as Schedule I to
this Schedule 14D-9)*
Exhibit 9 Form of Indemnification Agreement by and between the Company and
directors of the Company (incorporated by reference to Exhibit
10(g) of the Company's Annual Report on Form 10-K for the fiscal
year ended December 29, 1990 (File No. 1-9786))
Exhibit 10 Form of Indemnification Agreement by and between the Purchaser and
the directors and officers of its majority owned subsidiaries
(incorporated by reference to Exhibit 10.1 of the Purchaser's
Registration Statement on Form S-4 (File No. 333-90661))
Exhibit 11 Selected Sections of the Company's Amendment Number One on Form 10-
K/A to Form 10-K for the fiscal year ended January 1, 2000 (File
No. 1-9786)
</TABLE>
- --------
* Included in materials being distributed by the Company to shareholders of the
Company.
25
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 5, 2000
Thermo Instrument Systems Inc.
By: /s/ Polyvios C. Vintiadis
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Name: Polyvios C. Vintiadis
Title: Sole Member of the
Special Committee of the
Board of Directors
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[LETTERHEAD OF TUCKER ANTHONY APPEARS HERE]
May 5, 2000
Special Committee of the Board of Directors
Thermo Instrument Systems Inc.
81 Wyman Street
Waltham, MA 02454
Dear Sir:
We understand that Thermo Electron Corporation, a Delaware corporation
("Thermo Electron") commenced an offer to exchange as set forth in a
registration statement (the "Registration Statement") dated April 24, 2000 (the
"Offer"). Pursuant to the Offer and subsequent merger (the "Merger"), each
share of common stock of Thermo Instrument Systems Inc., a Delaware corporation
("the Company"), $.10 par value (the "Company Common Stock") shall be converted
into and exchanged for the right to receive .85 (the "Exchange Ratio") of a
share of common stock, $1.00 par value of Thermo Electron ("Thermo Electron
Common Stock").
You have requested our opinion (the "Opinion") as investment bankers as to
whether the Exchange Ratio as provided for in the Offer is fair, from a
financial point of view, to the holders of Company Common Stock other than
Thermo Electron and its affiliates and the officers and directors of the
Company (the "Public Shareholders").
Tucker Anthony Cleary Gull ("Tucker Anthony"), as part of its investment
banking business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and for corporate and other purposes. In the
ordinary course of our business, we may trade the securities of the Company and
Thermo Electron for our own account or the accounts of our customers and
accordingly, may at any time hold a long or short position in such securities.
In connection with the procedures outlined herein and in the preparation of
this Opinion, Tucker Anthony was not authorized by the Company to solicit, nor
have we solicited, third party indications of interest to acquire the Company.
Tucker Anthony will receive fees for the rendering of this Opinion and any
subsequent opinions in connection with the Offer.
In arriving at the Opinion, we have, among other things:
(i) reviewed the Registration Statement setting forth the Offer;
(ii) reviewed certain historical financial and other information
concerning the Company and Thermo Electron for the three fiscal years
ended December 31, 1999 and preliminary results for the quarter ended
March 31, 2000;
(iii) reviewed certain other information, including publicly available
information relating to the business, earnings, cash flow, assets
and prospects of the Company and Thermo Electron, respectively;
(iv) held discussions with the senior management of the Company, Thermo
Electron, Thermo Fibertek Inc. ("Fibertek") and Thermo Electron's
biomedical products business ("Biomedical") with respect to their
past and current business, operations, assets and financial
performance, financial condition and future prospects;
[LETTER FOOTER OF TUCKER ANTHONY APPEARS HERE]
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Special Committee of the Board of Directors
Thermo Instrument Systems Inc.
May 5, 2000
(v) analyzed certain publicly available financial and operating statistics
of publicly traded companies that we deemed comparable or otherwise
relevant to our inquiry, and compared the Company, Thermo Electron,
Fibertek and Biomedical from a financial point of view with the
appropriate public companies;
(vi) compared certain publicly available information concerning the nature
and terms of certain merger and acquisition transactions that we
considered relevant to our inquiry;
(vii) reviewed the market prices, historical trading activity and
ownership data of the Company and Thermo Electron; and
(viii) conducted such other financial studies and analyses and reviewed
such other information as we deemed appropriate to enable us to
render the Opinion. In our review, we have also taken into account
an assessment of general economic and business conditions and
certain industry trends and related matters.
In our review and analysis and in arriving at the Opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to us by the Company and Thermo Electron or that is
publicly available, and have not attempted to verify any of such information.
We have assumed (i) the financial projections of the Company and Thermo
Electron have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the Company's and Thermo
Electron's managements as to future financial performance and (ii) that such
projections will be realized in the amounts and time periods currently
estimated by the respective managements. We did not make or obtain any
independent evaluation or appraisals of any assets or liabilities of the
Company or Thermo Electron. The Opinion is necessarily based upon prevailing
market conditions (including current market prices for the Company Common
Stock and Thermo Electron Common Stock) and other circumstances and conditions
as they exist and can be evaluated as of the date hereof. We disclaim any
undertakings or obligations to advise any person of any change in any fact or
matter affecting the Opinion which may come or be brought to our attention
after the date of the Opinion.
For the purposes of the Opinion, we have not been asked to consider, and we
have not considered, the effect of any federal, state or local tax laws on the
Public Shareholders and have confined our review to the Exchange Ratio.
This letter is being furnished for the use and benefit of the Special
Committee of the Company's Board of Directors in evaluating the fairness, from
a financial point of view, of the Exchange Ratio. The Opinion does not
constitute a recommendation of the Offer or a recommendation to any Public
Shareholder as to any action such holder should take with respect to the
Offer. Tucker Anthony has advised the Special Committee that it does not
believe any person other than the Special Committee has the legal right to
rely on the Opinion and, absent any controlling precedent, would resist any
assertion otherwise. We hereby consent, however, to the inclusion of the
Opinion as an exhibit or annex to the Schedule 14D-9 the Company files with
the U.S. Securities and Exchange Commission and distributes to holders of
Company Common Stock in connection with the Offer. The Opinion rendered herein
is given as of the date hereof, and is limited in scope and subject matter as
set forth herein. No other opinions should be inferred beyond the opinion
expressly stated herein.
Based upon and subject to the foregoing, it is our Opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to
the Public Shareholders.
Very truly yours,
[/s/ Tucker Anthony Cleary Gull
Tucker Anthony Cleary Gull
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EXHIBIT 5
SPECIAL COMMITTEE OF THERMO INSTRUMENT SYSTEMS BOARD OF DIRECTORS
RECOMMENDS ACCEPTANCE OF THERMO ELECTRON EXCHANGE OFFER
May 5, 2000. Thermo Instrument Systems Inc. (ASE:THI) today announced that the
independent Special Committee of its Board of Directors is recommending that
shareholders accept the offer (the "Offer") made by Thermo Electron on
April 24, 2000 to exchange 0.85 shares of Thermo Electron stock for each share
of Thermo Instrument Systems stock. The Special Committee has determined that
this exchange ratio is fair consideration to be paid to the shareholders other
than Thermo Electron and the officers and directors of Thermo Instrument Systems
and the Special Committee is recommending that shareholders accept the Offer and
tender their shares pursuant to the Offer. The Special Committee strongly urges
each shareholder to read the factors considered by the Special Committee in the
company's Schedule 14D-9, which has been filed today with the Securities and
Exchange Commission and mailed to shareholders.
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EXHIBIT 7
THERMO INSTRUMENT SYSTEMS INC.
81 Wyman Street
Post Office Box 9046
Waltham, Massachusetts 02454-9046
May 5, 2000
Dear Shareholder:
On April 24, 2000, Thermo Electron Corporation ("Thermo Electron")
commenced an exchange offer to acquire all of the issued and outstanding
shares of common stock of Thermo Instrument Systems Inc. (the "Company") not
currently owned by Thermo Electron (the "Offer") at an exchange ratio of 0.85
shares of Thermo Electron common stock for each share of the Company's common
stock.
As a result of the potential conflict of interest among the members of the
Company's Board of Directors, other than the undersigned, and Thermo Electron
by virtue of Thermo Electron's majority ownership of the Company, the
Company's Board of Directors appointed the undersigned as a one-member
independent Special Committee to respond to the Offer. Based on the factors
considered by the Special Committee and set forth in the attached
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-
9"), which was filed today with the Securities and Exchange Commission, the
Special Committee is recommending that shareholders accept the Offer and
tender their shares of common stock of the Company pursuant to the Offer.
You should make your decision as to whether or not to tender your shares
based on all of the information available to you, including the factors
considered by the Special Committee and described in the Schedule 14D-9, and,
to that end, the Special Committee strongly urges that you read the enclosed
materials carefully and in their entirety.
Very truly yours,
/s/ Polyvios C. Vintiadis
Sole Member of the Special Committee
of the Board
of Directors of Thermo Instrument
Systems Inc.
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EXHIBIT 11
Selected Sections of the Company's Amendment Number One
on Form 10-K/A to Form 10-K for the fiscal year ended January 1, 2000
(File No. 1-9786)
EXECUTIVE RETENTION AGREEMENTS
Thermo Electron has entered into agreements with certain executive officers
and key employees of Thermo Electron and its subsidiaries that provide severance
benefits if there is a change in control of Thermo Electron and their employment
is terminated by Thermo Electron "without cause" or by the individual for "good
reason," as these terms are defined therein, within 18 months thereafter. For
purposes of these agreements, a change in control exists upon (i) the
acquisition by any person of 40% or more of the outstanding common stock or
voting securities of Thermo Electron; (ii) the failure of the Thermo Electron
board of directors to include a majority of directors who are "continuing
directors", which term is defined to include directors who were members of
Thermo Electron's board on the date of the agreement or who subsequent to the
date of the agreement were nominated or elected by a majority of directors who
were "continuing directors" at the time of such nomination or election; (iii)
the consummation of a merger, consolidation, reorganization, recapitalization or
statutory share exchange involving Thermo Electron or the sale or other
disposition of all or substantially all of the assets of Thermo Electron unless
immediately after such transaction (a) all holders of Thermo Electron common
stock immediately prior to such transaction own more than 60% of the outstanding
voting securities of the resulting or acquiring corporation in substantially the
same proportions as their ownership immediately prior to such transaction and
(b) no person after the transaction owns 40% or more of the outstanding voting
securities of the resulting or acquiring corporation; or (iv) approval by
stockholders of a complete liquidation or dissolution of Thermo Electron.
In 1998, Thermo Electron authorized an executive retention agreement with
each of Mr. Earl R. Lewis, Dr. Richard W. K. Chapman, Mr. Denis A. Helm and Mr.
Barry S. Howe. These agreements provide that in the event the individual's
employment is terminated under the circumstances described above, the individual
would be entitled to a lump sum payment equal to the sum of (a) in the case of
Mr. Lewis, two times, and in the case of Messrs. Chapman, Helm and Howe, one
time, the individual's highest annual base salary in any 12 month period during
the prior five-year period, plus (b) in the case of Mr. Lewis, two times, and in
the case of Messrs. Chapman, Helm and Howe, one times, the individual's highest
annual bonus in any 12 month period during the prior five-year period. In
addition, the individual would be provided benefits for a period of, in the case
of Mr. Lewis, two years, and in the case of Messrs. Chapman, Helm and Howe one
year, after such termination, substantially equivalent to the benefits package
the individual would have been otherwise entitled to receive if the individual
was not terminated. Further, all repurchase rights of Thermo Electron and its
subsidiaries shall lapse in their entirety with respect to all options and
restricted stock that the individual holds in Thermo Electron and its
subsidiaries, including the Company, as of the date of the change in control.
Finally, the individual would be entitled to a cash payment equal to, in the
case of Mr. Lewis, $20,000, and in the case of Messrs. Chapman, Helm and Howe
$15,000, to be used toward outplacement services. These executive retention
agreements supersede and replace any and all prior severance arrangements that
these individuals had with Thermo Electron.
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Assuming that the severance benefits would have been payable as of
January 1, 2000, the lump sum salary and bonus payment under such agreement to
Messrs. Lewis, Chapman, Helm and Howe would have been approximately $1,140,000
$373,000, $272,000 and $280,000, respectively. In the event that payments
under these agreements are deemed to be so called "excess parachute payments"
under the applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"), the individuals would be entitled to
receive a gross-up payment equal to the amount of any excise tax payable by
such individual with respect to such payment, plus the amount of all other
additional taxes imposed on such individual attributable to the receipt of
such gross-up payment.
