SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
Amendment No. 2
NYCOR, Inc.
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(Name of the Issuer)
NYCOR, Inc.
Fedders Corporation
Salvatore Giordano
Sal Giordano, Jr.
Joseph Giordano
William J. Brennan
S. A. Muscarnera
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(Name of Person(s) Filing Statement)
Common Stock, $1 par value
Class A Stock, $1 par value
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(Title of Class(es) of Securities)
670664 40 8
670664 50 7
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(CUSIP Number of Class(es) of Securities)
Kent E. Hansen, Esq.
NYCOR, Inc.
287 Childs Road
Basking Ridge, New Jersey 07920
(908) 953-8200
Robert N. Edwards, Esq.
Fedders Corporation
505 Martinsville Road
Liberty Corner, New Jersey 07938-0813
(908) 604-8686
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the
appropriate box):
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2
a. [X] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [X] The filing of a registration statement under the
Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [X]
Calculation of Filing Fee
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Transaction valuation* Amount of filing fee
$47,376,421 $16,336.36.
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* Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933 with respect to
the Registration Statement on Form S-4 referred to below.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration number, or the Form or Schedule
and the date of its filing.
Amount Previously Paid: $16,336.36
Form or Registration No.: Registration Statement on Form S-4
(No. 333-00483)
Filing Party Fedders Corporation
Date Filed: January 29, 1996
<PAGE>
EXPLANATORY NOTE
This Amendment No. 2 to the Schedule 13E-3 filed by NYCOR,
Inc., a Delaware corporation ("NYCOR"), Fedders Corporation, a Delaware
corporation ("FEDDERS"), and Salvatore Giordano, Sal Giordano, Jr.,
Joseph Giordano, William J. Brennan and S. A. Muscarnera, individuals
who are directors of both NYCOR and Fedders (collectively, the
"AFFILIATED DIRECTORS"), which was originally filed on March 13, 1996
and amended by Amendment No. 1 filed April 15, 1996, is being filed for
the sole purpose of filing Exhibits (b)(3) and (b)(4) to the
Schedule 13E-3.
In accordance with a continuing hardship exemption granted on
May 1, 1996 pursuant to a request submitted on behalf of NYCOR, Fedders
and the Affiliated Directors to the Securities and Exchange Commission
on April 17, 1996 and modified on April 24, 1996, portions of Exhibits
(b)(3) and (b)(4) to the Schedule 13E-3 have been submitted in paper
format under cover of Form SE. In each case, the paper format document
contains the legend required by Rule 202(c) of Regulation S-T.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS
The following exhibits to this Schedule 13E-3 are hereby filed
or are incorporated by reference as indicated:
(b)(1) Opinion of TM Capital Corp. (incorporated by reference
to Annex C to the Proxy Statement-Prospectus (the "PROXY STATEMENT-
PROSPECTUS") included in Amendment No. 3 to the Registration Statement
on Form S-4 of Fedders Corporation (No. 333-00483) (the "REGISTRATION
STATEMENT")).
(b)(2) Opinion of Laidlaw & Co. (incorporated by reference to
Annex D to the Proxy Statement-Prospectus).
(b)(3) Presentation to the Board of Directors of Fedders by TM
Capital Corp. on January 31, 1996.
(b)(4) Discussion Materials to the Board of Directors of NYCOR
by Laidlaw Equities, Inc. dated February 5, 1996.
(c) The Merger Agreement (incorporated by reference to Annex A
to the Proxy Statement-Prospectus).
(d) The Proxy Statement-Prospectus (incorporated by reference
to the Registration Statement).
(e) Section 262 of the Delaware General Corporation Law
(incorporated by reference to Annex E to the Proxy Statement-
Prospectus).
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2
SIGNATURES
After due 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.
May 3, 1996
NYCOR, Inc.
By /S/ KENT E. HANSEN
----------------------
Kent E. Hansen
Vice President-Finance and
General Counsel
FEDDERS CORPORATION
By /S/ ROBERT L. LAURENT, JR.
----------------------
Robert L. Laurent, Jr.
Executive Vice President
/S/ SALVATORE GIORDANO
----------------------
Salvatore Giordano
/S/ SAL GIORDANO, JR.
----------------------
Sal Giordano, Jr.
/S/ JOSEPH GIORDANO
----------------------
Joseph Giordano
/S/ WILLIAM J. BRENNAN
----------------------
William J. Brennan
/S/ S. A. MUSCARNERA
----------------------
S. A. Muscarnera
<PAGE>
EXHIBIT INDEX
(b)(1) Opinion of TM Capital Corp. (incorporated by
reference to Annex C to the Proxy Statement-
Prospectus (the "PROXY STATEMENT-PROSPECTUS")
included in Amendment No. 3 to the Registration
Statement on Form S-4 of Fedders Corporation
(No. 333-00483) (the "REGISTRATION STATEMENT")).
(b)(2) Opinion of Laidlaw & Co. (incorporated by reference
to Annex D to the Proxy Statement-Prospectus).
(b)(3) Presentation to the Board of Directors of
Fedders by TM Capital Corp. on January 31, 1996. P*
(b)(4) Discussion Materials to the Board of Directors
of NYCOR by Laidlaw Equities, Inc. dated
February 5, 1996. P*
(c) The Merger Agreement (incorporated by reference to
Annex A to the Proxy Statement-Prospectus).
(d) The Proxy Statement-Prospectus (incorporated by
reference to the Registration Statement).
(e) Section 262 of the Delaware General Corporation Law
(incorporated by reference to Annex E to the
Proxy Statement-Prospectus).
* Pursuant to a continuing hardship exemption granted by the Securities and
Exchange Commission on May 1, 1996, portions of this exhibit have been
filed in paper format; the balance of this exhibit is being filed
electronically.
Exhibit (b)(3)
FEDDERS
PROPOSED ACQUISITION
NYCOR
TM CAPITAL CORP.
January 31, 1996
<PAGE>
FEDDERS CORPORATION
TABLE OF CONTENTS
SECTION TAB
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NYCOR, INC.
Consolidated Historical and Projected Financial Information......... I
Operating Data by Subsidiary........................................ II
Stock Price and Volume History...................................... III
FEDDERS CORPORATION
Consolidated Historical and Projected Financial Information......... IV
Operating Data by Market............................................ V
Stock Price and Volume History...................................... VI
RELATIVE VALUATION ANALYSIS
Pro Forma Contribution Analysis..................................... VII
Pro Forma Equity Ownership Analysis.................................VIII
NYCOR VALUATION ANALYSIS
Analysis of Selected Publicly Traded Comparable Companies........... IX
Relative Market Performance Analysis................................ X
Selected Merger Transactions........................................ XI
Discounted Cash Flow Analysis....................................... XII
FEDDERS VALUATION ANALYSIS
Analysis of Selected Publicly Traded Comparable Companies...........XIII
Relative Market Performance Analysis................................ XIV
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I
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II
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III
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IV
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V
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VI
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VII
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VIII
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IX
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NYCOR, INC.
Selected Publicly Traded Components Manufacturers
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BALDOR ELECTRIC COMPANY
Baldor manufactures electric motors and drives, as well as speed
reducers, industrial grinders, buffers, polishing lathes, stampings,
casting and repair parts. Motors and drives are manufactured for
general purpose uses and for individual customer requirements and
specifications. Marketing of products is conducted throughout the U.S.
and in over 55 foreign countries. Custom and stock products are sold
directly to original equipment manufacturers. Stock products are also
sold to independent distributors for resale, often as replacement
components in industrial machinery that is being modernized or upgraded
for improved performance. Many of the components used in its products
are manufactured by Baldor, including laminations, motor hardware, and
aluminum die castings. Baldor's motor manufacturing operations also
include machining, stamping, welding, winding, assembling, and finishing
operations.
FRANKLIN ELECTRIC
Franklin Electric is the world's largest manufacturer of submersible
electric motors and a leading producer of engineered specialty electric
motor products and electronic controls. Franklin's products are sold,
through its global team of field sales engineers, throughout the world
primarily to original equipment manufacturers. Franklin's submersible
motors are used principally for providing the electrical power for water
well-pumping systems. The motors are also used in underground gasoline
and diesel fuel storage pumping systems, oil wells and wastewater
handling systems. Franklin's engineered specialty motor products and
electronic controls are used in industrial and consumer products ranging
from paint sprayers to livestock feeding equipment and from supermarket
check-out belts to soft ice-cream machines. Franklin holds a 97%
interest in Oil Dynamics, Inc., a manufacturer of submersible oil
pumping systems.
MAGNETEK, INC.
MagneTek designs, manufactures and markets a broad range of electrical,
electronic and industrial products. The Company operates in two
business segments. The motors and controls segment manufactures motors
and generators, including fractional, integral and medium voltage
generators, and electronic adjustable-speed and other drives and drive
systems. The ballast and transformer segment includes lighting
products, power supplies and transformer products. Lighting products
consist of fluorescent ballasts, high-intensity-discharge (HID) ballasts
and specialty lines. Transformer products are comprised of electronic
power supplies custom designed for business machines and industrial
equipment. MagneTek is an industry leader in magnetic fluorescent and
HID ballasts. Ballasts are transformers that serve to regulate or alter
electrical current in fluorescent and other lighting applications.
<PAGE>
NYCOR, INC.
Selected Publicly Traded Components Manufacturers
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TECUMSEH PRODUCTS
Tecumseh Products Company is a full-line, independent global
manufacturer of hermetic compressors for air-conditioning and
refrigeration products, gasoline engines and power train components for
lawn and garden applications, and pumps. The Company is one of the
largest independent producers of hermetically sealed compressors and is
a leading maker of small gasoline engines and power train products used
in lawn and garden applications. Compressor products include a broad
range of air-conditioning and refrigeration compressors and compressor
parts, as well as refrigeration condensing units. Tecumseh's compressor
products range from fractional horsepower units used in small
refrigerators and dehumidifiers to large units used in commercial air-
conditioning applications. The Company also produces an extensive line
of pumps. Tecumseh markets its products in over 100 countries around
the world.
WATSCO, INC.
Watsco is the largest independent distributor of residential central air
conditioners and related parts and supplies in the U.S. The Company
also provides temporary help and permanent placement services. Watsco's
primary markets include Florida, Texas, California, Arizona, Nevada and
Louisiana. The Company distributes products to over 1,000 local air-
conditioning and heating contractors and dealers serving the residential
and home-building segments of the market. Manufactured products include
a wide variety of electronic and mechanical components for air-
conditioning, heating and refrigeration equipment, including line tap
and specialty valves, motor compressor protectors, liquid sight glasses
and warm air controls. The Dunhill Personnel System division provides
both permanent and temporary personnel services to businesses,
professional and service organizations, and government agencies.
<PAGE>
X
<PAGE>
XI
<PAGE>
NYCOR, INC.
Selected Comparable Merger Transactions
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WELBILT CORPORATION ACQUIRED BY BERISFORD INTERNATIONAL PLC
Berisford International acquired 100% of outstanding shares of the
Welbilt Corporation through a merger valued at $451.9 million.
Berisford acquired 4.3 million common shares, representing 46.7% of
total shares outstanding, from Kohlberg & Co. for a cash price of $30.00
per share, or $129.4 million. Berisford acquired the remaining 53.2% of
Welbilt, representing 4.9 million shares, for $33.75 in cash per share,
for a total of $165.4 million. Berisford's assumption of $157.1 million
in Welbilt liabilities was also part of the transaction. Welbilt
manufactures and wholesales food service, heating and air-conditioning
equipment as well as household appliances.
REXNORD CORPORATION ACQUIRED BY BTR DUNLOP HOLDINGS INC.
BTR Dunlop Holdings Inc., a wholly owned subsidiary of the U.K. firm BTR
PLC, merged with Rexnord Corporation through a transaction valued at
$813.7 million. BTR acquired each share of Rexnord common stock for
$22.50 in cash per share, in addition to the assumption of $403.00
million of Rexnord debt. The Fairchild Corporation, with a 43.9% stake
in Rexnord, as well as an institutional investor with a 6.0% stake, both
divested their shares at the $22.50 cash price per share offered by BTR.
Rexnord manufactures ball and roller bearings and industrial power
transmission equipment including sprockets, speed changers,
electromagnetic brakes and clutches.
DESIGNATRONICS, INC. ACQUIRED BY DYSON, DYSON & DUNN INC.
Dyson, Dyson & Dunn, a privately held investment company, purchased a
100% stake in Designatronics, Inc. by acquiring all 3.0 million shares
outstanding at a cash price per share of $6.00, in a transaction valued
at $17.7 million. Designatronics manufactures speed changers,
industrial high-speed drives and gears, electronic coils, transformers
and inductors, as well as household audio and video equipment.
MR. COFFEE, INC. ACQUIRED BY HEALTH O METER PRODUCTS
Health o meter Products acquired all outstanding common stock of Mr.
Coffee for a cash price per share of $15.50 for a total value of $154.7
million. The value of the transaction included options to purchase
531,286 shares of common stock with a value of $15.50 per share less an
average exercise price of $5.79. Mr. Coffee manufactures electric drip
coffee makers.
RELIANCE ELECTRIC CO. ACQUIRED BY ROCKWELL INTERNATIONAL CORPORATION
Rockwell International acquired all Class A and Class B common shares of
Reliance Electric for a cash price per share of $31.00. The transaction
also included the purchase of all Reliance Electric Class C shares for
$83.95 per share bringing the total acquisition value of Reliance common
stock to $1.6 billion. Reliance Electric manufactures electric motors
and generators, electric drives, industrial controls, programmable
controllers, mechanical power transmission equipment, and specialty
telecommunications equipment.
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XII
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XIII
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FEDDERS CORPORATION
Selected Publicly Traded Household Appliance Manufacturers
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DURACRAFT CORP.
Duracraft develops, manufactures and markets branded consumer household
products. The Company's current product line consists of home comfort
products in five major product areas: humidifiers, heaters, fans, air
cleaners and vaporizers. Products are distributed through major
retailers throughout the U.S. and Canada including Sears, Kmart, Wal-
Mart, Target, Sam's Club, Ames, Service Merchandise, Builder's Square,
Lowe's and PriceCostco.
MAYTAG CORP.
Maytag is engaged in two industry segments: appliances and vending
equipment. Home appliances include laundry equipment, gas and electric
ranges, refrigerators, freezers, dishwashers, food waste disposals and
floor care products. Important trademarks include Maytag, Magic Chef,
Admiral, Jenn-Air, Hardwick, Norge and Hoover. Maytag's products are
sold to all major market segments, including the replacement market, the
commercial laundry market, the new home and apartment building market,
the manufactured housing market, the recreational vehicle market, the
private-label market, and the household/commercial floor care market.
Most products are sold directly to dealers and through independent
distributors, mass merchandisers and large national department stores.
Dixie-Narco produces soft-drink vending equipment and money changers.
Its products are sold to all major bottlers. Maycor Appliance Parts and
Service Co. provides consolidated service and parts distribution for
most of Maytag's appliance brands. Maytag International Inc. handles
the sales of appliances and licensing of certain home appliance brands
in markets outside of North America. Maytag Financial Services provides
financing programs to certain customers in North America.
MESTEK, INC.
Mestek, Inc. is engaged in the following businesses: the manufacture of
heating, ventilating and air-conditioning (HVAC) equipment; computer
software development and systems design; and the production of coil-
handling equipment. Through the Reed division, the company manufactures
and distributes HVAC products, including residential, commercial and
industrial heat distribution products, gas-fired heating and ventilating
equipment, louver and damper equipment, commercial and residential gas-
and oil-fired boilers, air-conditioning units and related products used
in air distribution. Reed sells its products through 350 independent
representatives throughout the U.S. and Canada, which in turn sell to
contractors and end-users in the construction industry. MSC, Inc. is a
wholly owned subsidiary engaged in computer processing and systems
development in order to serve specific industry needs, such as third-
party billing, inventory control, financial reporting and telephone
usage tracking. MSC, Inc. designs computer software, supplies hardware,
installs systems and produces ongoing support services. The Cooper-
Weymouth, Peterson division manufactures various types and sizes of
coil-handling devices such as metal coil straighteners and equipment
used to feed metal from coils into metal stamping or shaping equipment.
<PAGE>
FEDDERS CORPORATION
Selected Publicly Traded Household Appliance Manufacturers
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WHIRLPOOL CORP.
Whirlpool manufactures a full line of household appliances and other
products for home and commercial use. Products are manufactured in 12
countries and marketed in more than 120 worldwide. Major appliance
products include home laundry equipment; home refrigeration and room
air-conditioning equipment; and various other appliances, including
dishwashers and cooking equipment. Whirlpool Financial Corp. provides
financing primarily for distributors and dealers that market products
manufactured by the Company. Major brands in the U.S. include
Whirlpool, KitchenAid, Roper, Estate, and Coolerators. Sales made to
Sears are mainly under the Kenmore and Whirlpool names. Major brands in
Canada are Inglis, Admiral, Speed Queen, Estate, Roper, Whirlpool and
KitchenAid. Sales made by Whirlpool Europe, B.V. are under the Algor,
Bauknecht, Fides, Ignis, Laden, and Whirlpool brand names.
YORK INTERNATIONAL
York is a full-line manufacturer of heating, ventilating, air-
conditioning and refrigeration products. Products are sold in 20
countries through over 700 sales and distribution centers. Products
fall into three main categories: commercial, including heating, air-
conditioning, process cooling and thermal storage equipment for
commercial applications in stores, buildings, malls, manufacturing
plants, airports and ships; residential, consisting of central air-
conditioning and heat pumps, furnaces and hermetic compressors; and
refrigeration and gas compression equipment, for use in food, beverage,
chemical and petrochemical processing. Residential products are
marketed throughout the U.S. and internationally through 43 exclusive
distributors, 10 company-owned distribution centers, and more than 200
nonexclusive distributors and wholesalers. Other products are marketed
directly to contractors, distributors, architects, engineers and
building owners.
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XIV
Exhibit (b)(4)
STRICTLY CONFIDENTIAL
Discussion Materials
NYCOR, Inc.
February 5, 1996
Laidlaw Equities, Inc.
<PAGE>
TABLE OF CONTENTS
TAB
---
Background and Valuation Process.......................................... 1
Stock Price History ...................................................... 2
Stock Price Premium Analysis ............................................. 3
Comparable Trading Valuation ............................................. 4
Comparable Transaction Valuation ......................................... 5
Discounted Cash Flow Analysis ............................................ 6
APPENDIX ................................................................. 7
Comparable Trading Analysis
Selected Comparable Transaction Analysis
NYCOR Stand-Alone Discounted Cash Flow Analysis
Convertible Preferred Stock Analysis
<PAGE>
BACKGROUND
The Board of Directors of NYCOR, Inc. ("NYCOR") has retained Equities,
Inc. ("Laidlaw") to render an opinion regarding the fairness of NYCOR's
merger agreement (the "Merger Agreement") with Fedders Corporation
("Fedders").
The fairness opinion of Laidlaw addresses only the fairness to NYCOR
from a financial point of view of the consideration (as defined below)
proposed to be paid by Fedders pursuant to the merger offer and does not
constitute a recommendation to any NYCOR shareholder as to how such
shareholder should vote concerning the merger. The consideration was
determined through negotiations between NYCOR and Fedders. The Laidlaw
opinion does not constitute a recommendation to any NYCOR shareholder in
respect of such shareholder's decision whether to vote in favor of the
proposed Merger Agreement.
For purposes of its opinion, Laidlaw defined the consideration to be
paid for each share of NYCOR Common Stock, Class A Stock or Class B
Stock as either (i) such number of shares of Fedders Class A Stock
representing $6.25 if the market value of the Fedders Class A Stock is
equal to or greater than $6.25 per share on the date of the Merger; or
(ii) one share of newly issued Fedders Convertible Preferred Stock. If
issued, each share of Fedders Convertible Preferred Stock (i) will be
convertible into one share of Fedders Class A Stock; (ii) may be called
for redemption by Fedders at any time at the redemption price of $6.25,
plus unpaid dividends to the dividend payment date next preceding the
date of redemption, in cash or in equivalent value of Fedders Class A
Stock; and (iii) shall have such other rights and preferences expected
to support an initial market value of $6.25 per share. Although the
precise terms of the Fedders Convertible Preferred Stock will not be set
until the business day before the effective date of the Merger, and only
if the closing price of the Fedders Class A Stock is below $6.25,
Laidlaw was informed that it is currently contemplated that the Fedders
Convertible Preferred Stock will have (i) an annual dividend rate of
6.5%; and (ii) a liquidation preference of $6.25 per share, plus unpaid
dividends to the dividend payment date next preceding such liquidation
(the "Proposed Terms"), and our opinion is based on the Proposed Terms.
In aggregate, the purchase price for the Common Stock, Class A Stock and
Class B Stock of NYCOR is assumed to be $47,275,000. Total transaction
value is assumed to be $70,275,000, including the conversion of NYCOR
Preferred Stock at $20.00 per share into $23,000,000 face amount of
NYCOR 8 1/2 % convertible subordinated debentures due 2012.
Laidlaw believes that its analyses must be considered as a whole and
that selecting portions of its analyses or portions of the factors
considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its
opinion. In its analysis, Laidlaw made numerous assumptions with
respect to NYCOR and Fedders, industry performance, general business,
regulatory, economic, market and financial condition and other matters,
many of which are beyond the control of NYCOR and Fedders. The
estimates contained in such analyses are not necessarily indicative of
actual values or of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In
addition, analyses relating to the value of business or securities do
not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, because
such estimates of actual values or future results or values are
inherently subject to substantial uncertainty, Laidlaw assumes no
responsibility for their accuracy.
<PAGE>
VALUATION PROCESS
In arriving at its opinion, Laidlaw (1) reviewed certain publicly
available business and financial information relating to NYCOR and
Fedders, (2) reviewed the Merger Agreement between Fedders and NYCOR,
(3) reviewed certain other information, including financial forecasts
for NYCOR and Fedders, provided by each company, (4) met with management
of both companies to discuss the businesses and prospects of NYCOR and
Fedders, their respective projected performance, the strategic
importance of NYCOR to Fedders, and the benefits expected to be achieved
through the combination of the operations of NYCOR and Fedders, (5)
considered certain financial and stock market data of NYCOR and Fedders
and compared such data with similar data for other publicly held
companies in businesses similar to those of NYCOR and Fedders, (6)
considered the financial terms of certain other business combinations
and other transactions which recently have been effected, and (7)
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which Laidlaw
deemed relevant.
In connection with its review, Laidlaw did not assume any responsibility
for independent verification of the foregoing information and relied on
its being complete and accurate in all material respects. With respect
to the financial forecasts, Laidlaw assumed that such forecasts were
reasonably prepared on bases reflecting the best currently available
estimates and judgments of management of NYCOR and Fedders as to the
future financial performance of NYCOR and Fedders. In addition, Laidlaw
did not make an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of NYCOR or Fedders, nor was
Laidlaw furnished with any such evaluations or appraisals. Laidlaw's
opinion is necessarily based upon financial, economic, market and other
conditions as they existed and could be evaluated on the date of its
opinion. Laidlaw does not express any opinion as to the prices at which
Fedders Class A Stock or Convertible Preferred Stock will trade
subsequent to a merger.
Laidlaw estimated NYCOR's value using the following methodologies, which
are discussed in greater detail in this report:
STOCK PRICE HISTORY. The historic market price per common share of
NYCOR was compared to the price per common share contemplated in the
Merger Agreement.
STOCK PREMIUM ANALYSIS. The market premium for NYCOR common stock for
one day, one week and four weeks prior to the announcement was compared
to stock premiums for other public merger and acquisition transactions
announced since the beginning of 1995.
COMPARABLE TRADING VALUATION. Valuations of publicly traded comparable
companies as multiples of operating results were compared to the market
valuation of NYCOR as a multiple of its operating results.
COMPARABLE TRANSACTION VALUATION. Multiples of operating results to
transaction value for recent transactions of comparable companies were
compared to multiples of NYCOR operating results to the consideration
contemplated in the Merger Agreement.
STAND-ALONE DISCOUNTED CASH FLOW. Estimates of future cash flows for
NYCOR on a stand-alone basis were discounted back to present value for
comparison to the consideration contemplated in the Merger Agreement.
<PAGE>
OTHER CONSIDERATIONS. Laidlaw considered employing other methodologies
in its valuation of NYCOR but chose to use only those methodologies
listed above for several reasons. Several unique characteristics of
NYCOR render certain analyses, such as a pro forma projected earnings
analysis or a leveraged buyout analysis, less insightful in developing a
valuation. These factors include:
* an extremely high level of sales under a long-term contract with one
customer (Fedders), which increases business risk and reduces the
attractiveness of NYCOR to potential suitors, who might currently
compete with Fedders, or to potential lenders.
* high volatility of demand for air-conditioners due to climatic variations
and seasonality, which might reduce the attractiveness of NYCOR to
potential suitors in other industries.
* difficulty in obtaining financing for NYCOR operations due to the
concentration and volatility of sales, which would make a leveraged
buyout of NYCOR impractical.
CONVERTIBLE PREFERRED STOCK. The terms of publicly traded convertible
preferred stocks, including conversion premium, dividend rate and other
factors for a sample of public companies with a variety of ratings, were
compared to the terms contemplated for the Fedders Convertible Preferred
Stock.
<PAGE>
COMPARABLE TRADING VALUATION
Laidlaw reviewed and compared certain actual and forecasted financial
and operating information of NYCOR with comparable information for other
publicly traded companies in the refrigeration, heating and cooling
industries. Laidlaw selected these companies based on the companies'
primary line of business, size relative to NYCOR and relative financial
performance, and it calculated recent trading multiples of net earnings,
EBIT and revenues to equity value. All forecasted sales, EBIT and net
income multiples for the comparable companies were based on information
contained in equity research reports. The equity values of the
comparable companies used in the foregoing analyses were based on stock
prices as of January 23, 1996. All financial estimates for NYCOR for
the 1996 fiscal year were based on certain operating and financial
forecasts provided by NYCOR management. Laidlaw determined that the
relevant ranges of multiples for the comparable companies are:
Industry Market PE
Multiples NYCOR Averages
--------- ----- ----------
Earnings LTM(1) High 16.6x S&P 17.2
Mean 10.7x NM NASDAQ 35.6
Low 8.1x
Earnings 1996E(1) High 13.3x
Mean 9.7x 16.1x
Low 8.3x
EBIT LTM High 8.5x
Mean 6.1x NM
Low 4.3x
Revenues LTM High 0.8x
Mean 0.6x 0.9x
Low 0.3x
(1) Earnings attributable to common stock after deduction of preferred
dividends, last twelve months (LTM).
The purchase price of $47.3 for the common equity and $23.0 for the
preferred equity of NYCOR implies an equity value of 0.9x LTM revenues,
above the comparable public companies. Multiples of LTM results for net
income and EBIT for NYCOR are not meaningful due to losses. The purchase
price of $6.25 per share for the common equity of NYCOR implies a purchase
price multiple of 16.1x forecast 1996 earnings, representing a premium
compared to other similar public companies.
<PAGE>
COMPARABLE TRANSACTION VALUATION
Using publicly available information, Laidlaw has analyzed the purchase
prices and multiples paid in several transactions involving businesses
in the same or a similar industry as the Company. Upon analysis of
comparable transactions, Laidlaw finds the relevant range of multiples
of comparable company performance to transaction values to be:
Parameter Range Of Multiples Average
--------- ------------------ -------
(1) Sales 0.4x to 1.5x 0.9x
(2) EBITDA 9.1x to 10.1x 9.7x
(3) EBIT 11.8x to 36.0x 19.0x
(4) Net Income 30.4x to 61.8x 43.2x
Using the mean multiples derived by the analysis described above,
Laidlaw compared the NYCOR transaction value as a multiple of NYCOR
fiscal 1995 financial results. Precedent transactions would imply a
value for NYCOR as follows:
Parameter 1995 Implied Value
-------------- -------------
(1) Sales $71 million
(2) EBITDA $21 million
(3) EBIT NM
(4) Net Income NM
These compare to the estimated total equity value of $70.3 million,
including $47.3 for the common equity and $23.0 million for the
preferred equity of NYCOR.
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DISCOUNTED CASH FLOW ANALYSIS
Laidlaw analyzed the ongoing business of NYCOR using discounted cash
flow analysis to estimate the enterprise value of NYCOR for comparison
to the value of the proposed transaction with Fedders.
OPERATING ASSUMPTIONS: Due to the volatility of air-conditioner demand,
neither Fedders nor NYCOR management believes that accurate forecasts of
demand and pricing can be made beyond the period of one year. This
volatility of demand is due in large part to variation in weather:
unseasonably hot weather spurs excess demand for air-conditioners while
unseasonably cool weather reduces demand. This climatic variability is
offset, to some extent, by recent growth in sales to markets outside the
United States.
To determine the present value of potential future cash flows for NYCOR
without the benefit of long-range management forecasts, Laidlaw used
historic operating results and one-year forecasts provided by the
management of NYCOR as a predictor for future operating results to
develop a discounted cash flow scenario. Therefore, operating
assumptions used by Laidlaw in its discounted cash flow analysis may not
accurately reflect the operations of NYCOR and/or Fedders in the future.
Actual results achieved by the combined company may vary from forecasted
results, and the variations may be material.
Laidlaw calculated an equity value for NYCOR based upon the present
value of NYCOR's 10-year stream of forecasted free cash flows and fiscal
year 2006 terminal value. The fiscal year 2006 terminal value was
calculated as a perpetuity of the estimated rate of return on invested
capital.
In conducting its analysis, Laidlaw relied on certain assumptions
relating to sales growth, operating margins and capital expenditures of
NYCOR's businesses provided by NYCOR management. For the 10-year
forecast, Laidlaw applied a discount rate of 13% to future cash flows.
This analysis resulted in a per share valuation of $5.99 for NYCOR
Common Stock based on Laidlaw operating assumptions, which may or may
not reflect actual future operations.
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APPENDIX
