Nypro Inc. (A): The Employee Stock Ownership Plan (ESOP)

Nypro, Inc., a global leader in manufactured precision plastic products headquartered in Clinton, Massachusetts, had one of the largest employee stock ownership plans in the United States and was often held up as an example of best practices in that area. However, in early 2012, its president and chief executive officer became increasingly concerned that a market downturn might turn into a liquidity crisis. During the 2008 recession, a small percentage of the company’s employee shareholders had decided to cash in their shares, which the company was required to repurchase. Although the stock redemptions were draining the company of the funds needed to pursue valuable market opportunities, it somehow still managed to outperform many of its competitors. However, some believed that the company’s current trajectory was unsustainable. Its visionary leader had vowed never to sell the company or take it public, but when an offer was made to buy the company, many felt it was time to make this move. See supplements 9B14N029, 9B14N030 and student spreadsheet 7B14N028.

<ul><li>To introduce the Employee Stock Ownership Plan to students.</li><li>To understand both the benefits and risks of employee ownership.</li></ul>

• Employee participation
• valuation
• financial strategy
• incentives
• mergers and acquisitions
• United States