Question
From: (redacted)
Sent: Tuesday, November 15, 2005 8:07 PM
To: Verne,B. Michael
Subject: HSR Question
Mike, I wantedto follow-up on our call on Tuesday regarding calculating the acquisition pricefor an asset transaction and also provide some facts. The buyer is agreeing toacquire a business for $48 million with a net working capital adjustment. Ifthe net working capital at closing exceeds approximately $5.5 million, thepurchase price will be adjusted upward and vice versa. The buyer does notexpect that the net working capital will exceed the $5.5 million by an amountthat when added to the $48 million purchase price would exceed the $53.1million size-of-transaction threshold. Under the net working capitaladjustment, the buyer will be assuming certain short-term liabilities,including accounts payable, but short-term assets which will also be assumed,such as accounts receivables, are expected to more than offset the short-termliabilities. These liabilities are estimated at $6 million and if theseliabilities have to be added to the $48 million purchase price, the size oftransaction threshold would be exceeded. From our discussion, I understand thatthe buyer must estimate no more than 60 days prior to close the amount of thenet working capital adjustment and add or subtract that from the purchase priceand does not have to add the short-term liabilities covered by the net workingcapital adjustment to the purchase price. The buyer will also have to do a fairmarket valuation of the assets but expects that to be below $53.1 million.
Please let meknow if this is correct and if you would like to discuss it further pleasecall.