Question
From:(redacted)
Sent:Thursday, March 01, 2007 3:35 PM
To:Verne, B. Michael
Cc:(redacted)
Subject:HSR Applicability Scenario
Mike -
I'mhoping you can confirm our understanding of a transaction as to HSRnon-reportability due to failure to meet the size of the transaction test(assume for purposes of this question that the other two jurisdictionalthresholds are met). I think we are on firm ground, but I'd appreciate yourviews.
Buyer, Buyer Subsidiary and Target Company haveentered into an Agreement and Plan of Merger in which Buyer Subsidiary mergesinto Target Company with Target Company as the surviving corporation.Pre-merger Target Company shareholders receive all cash. Post-merger, TargetCompany is a wholly-owned subsidiary of Buyer.
Mergerconsideration is based on a formula with a $130 million base purchase price,subject to various reductions, including existing Borrowed Money Debt of about$50 million. Therefore, on a net basis, Target Company's shareholders receiveabout $80 million in proceeds.
Of that $80 million in proceeds, however, $55 millionis funded through a sale leaseback transaction. Immediately following the merger(by this I mean a millisecond later), $55 million worth of real estate owned byTarget Company and its wholly-owned subsidiaries is sold to an unrelated thirdparty Real Estate Purchaser and Target Company and its wholly-ownedsubsidiaries immediately lease that real estate back from the third party RealEstate Purchaser.
Theattached addresses a similar sale-leaseback situation where essentially thesale-leaseback purchase price is also not counted in calculating the size ofthe transaction. The attached was done when the size of the transaction testwas still $15 million.
Inthe present deal, this would mean that at the end of the day we have a $25million purchase of voting securities ($130 - $50 existing debt - $55 millionsale - leaseback proceeds) and it's a non-reportable transaction for failure tomeet the size of the transaction test.
Please let me know ifthis is correct or advise and I will call you about this if there are anyquestions. I'm not in my office today; Minnesota is in the midst of a pretty heavy snowfall. Thanks,Mike.