Question
From:
(Redacted)
Sent:
Wednesday, March 17, 2010 11:06 AM
To:
Verne, B. Michael
Cc:
(Redacted)
Subject: ValuationIssues Under 802.4
Mike, we would like to get your views oncertain valuation issues under a Section 802.4 analysis arising from a proposedtransaction. Foreign company ("Buyer") is in discussions to acquirethe voting securities of a US public company ("USCo") engaged inservices activities. The size of parties is satisfied, and the value of thevoting securities of USCo to be acquired is above the size of transactionthreshold.
USCo has several foreign subsidiariesthat, collectively, do not have US sales of more than $63.4 million. Thus, theacquisition of the foreign subsidiaries would be exempt under Section 802.51(b). The board (or designee) of Buyer will need to make a fair market valuedetermination of the non-exempt assets (in this fact pattern the assets ot theUSCo excluding its foreign subsidiaries). One of the principal assets of USCois its servicing contracts. These contracts may be with a US company or non-US company, and certain of the services are provided outside the United States at the foreign entities or subsidiaries of the customer. This has raised thefollowing valuation issues under a Section 802.4 analysis:
1. With respect to the contracts of USCo where the services are provided toa customer site outside of the United States, can Buyer consider that portionof the contract (and corresponding revenues) for services provided outside the United States as an HSR exempt asset.
Please let us know if you have any questionsconcerning the fact pattern presented. Thanks in advance for yourconsideration.