MONMOUTH INC.

Case
M&A Analysis

Submitted by Group-6
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 Monmouth Inc-About the Company

Company
Background
Leading producer of engines and compressors
Major consumers & clients: Oil & Gas industries
Operates in a cyclical market
based on nature of machine and equipment sales
Sought stable firm to be included in their portfolio
Diversify portfolio through acquisitions
Sales breakdown
Share price: $24
Industrial market: 25%, Consumer market: 75%
Looking to expand in the industrial market
Acquisition parameters
Industry should be one in which Monmouth could become a major player
Management wanted to have leadership in a few distinct areas
Fairly stable industry with a broad market for products and a product line of- small ticket items
To eliminate companies having undue profit dependencies
Acquire only leading companies in their respective market segments

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 Monmouth Inc-Previous Acquisition

DESSEX RULE
KROLL ELECTRIC
Worlds largest manufacturer of
Worlds leading supplier of soldering tools in
measuring rules and tapes
Industrial, Electronic & Consumer markets
Acquisition rationale
Acquisition rationale
Quality product line
High quality product line and production
Good distribution network (15,000
capacity in England, Germany & Mexico
retail hardware stores in US

KEANE CORPORATION

Highly profitable; suffering due to

mismanagement
Acquisition rationale
High quality measuring and fastening line

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 Robertson Tool Company-Overview

Poor sales and profit performance

Dwindling
Projected 2% growth against industry growth rate of 6% Performance

Low percentage of outstanding stock held by family & management

Largest domestic manufacturer of cutting and edge hand tools

Good
Acquisition
Leader in its two product areas
Target
because
Distribution network involving 2100 wholesalers, extending to 15,000 retail outlets

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 Takeover Attempt by Simmons

2000: Simmons, a wide ranging conglomerate with interests in electrical

equipment's, tools, nonferrous metals and rubber products purchased
44,000 Robertson shares

March, 2003: Simmons informed Robertson management of its plan to

tender immediately for 437,000 of Robertsons 584,000 outstanding
shares at $42 per share in cash. The $42 per share represented a $12
premium. This eventually became the first opportunity for Monmouth.

April, 2003: An agreement was reached with NDP Corporation, a firm

with major interest in publishing and replacement and original automotive
equipment, to do a merger. The offer was a 5:1 common stock swap.

As Simmons was concerned about the devaluation after NDP-Robertson

merger announcement, Simmons wanted it to come together with
Monmouth and this translated as the second opportunity for Monmouth.

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 Potential Benefits From Acquisition-
ManMouth
Reduction of COGS
Effort to sell every market segment
results in manufacturing
inefficiency & ballooning inventories
Estimate to reduce COGS from
69% to 65% of sales
Reduction in SG&A expenses
To be managed by unifying sales
force of hand tool lines and
advertising
Drop down from 22% to 19% of
sales
CONCLUSION
Opportunity for
Simmons As per the calculations the
In Robertson-Monmouth acquirer should extend the
merger, Simmons could
convert its shares into
offer to Robertson as the
common stock of company is Undervalued
Monmouth
Redistribution of market segments to achieve
better earnings
75% Industrial and 25% Consumer pattern would
change to 50% Consumer, 50% Industrial
Sales increases could be expected from Robertsons
pulling more Monmouth product in the industrial
markets
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