Question
From:
(Redacted)
Sent:
Monday, September 14, 2009 3:25 PM
To:
Verne, B. Michael
Cc:
(Redacted)
Subject: FW:801.10 Question
Dear Mike-
(Redacted) and Iwould like to confirm the following analysis.
Company A, apublicly traded company, is acquiring by merger 100% of the shares of Company B,a private corporation. The merger consideration to be paid to Company B'sshareholders are Company A shares in a fixed ratio exchange to Company Bshares.
Our questionconcerns the valuation of the acquisition of Company A shares by Shareholder 1,the UPE of Company B. Shareholder 1 will acquire Company A shares according tothe fixed ratio exchange formula, and will also purchase additional Company Ashares for cash. Closing is more than 45 days away. Because closing is morethan 45 days away, (1) the acquisition price of the Company A shares to beacquired by Shareholder 1 is not determinable and (2) Shareholder 1 can not usethe market price of Company A's shares to value the transaction. Instead, thevalue of Shareholder 1 's acquisition is the fair market value of Company A'sshares, plus the cash consideration. The board of Shareholder 1, or the board'sdesignee, must in good faith determine the fair market value of Company A'sshares. Shareholder 1 may rely on this good faith valuation for 60 days. Ifclosing takes place more than 60 days after the valuation, then Shareholder 1must recompute the fair market value of Company A's shares that it intends toacquire.