Question
From: (redacted)
Sent: Tuesday, May 09, 20069:48 AM
To: Verne, B.Michael
Subject:Confirmation of advice re transaction value
Dear Mike:
Thisis to confirm your advice regarding measurement of the size of a transactionpursuant to 16 CFR 801.10(a)(2).
Ourclient plans to form a new corporation to purchase 100% of the votingsecurities of certain privately-held entities which have a common ultimateparent entity. The stock purchase agreement provides that the consideration is1) a stated cash amount plus or minus certain financial factors (indebtedness,net working capital deficit, cash of the acquired company, net working capitalsurplus, capital expenditures) and 2) stock in the new corporation (RolloverStock) which will be given to the shareholders of the acquired company. Ourclient has a reasonable basis for estimating the adjustments in the cash price.The question on which we seek your guidance is the valuation of the RolloverStock, and specifically, whether the indebtedness of the new corporation can beconsidered in valuing the Rollover Stock. Our client plans to borrow all oralmost all of the money to pay the cash consideration which will beindebtedness on the balance sheet of the new corporation.
Youadvised that in valuing the Rollover Stock, our client may consider theindebtedness of the new corporation.
Pleaseadvise me whether my understanding is correct. Thank you, as always, for yourvaluable assistance.