SEC Liberalizes Foreign Private Issuer Deregistration Rulesby Matt Adler and Marty Lorenzo At its open meeting held on March 21, 2007, the Securities and Exchange Commission approved new rules that make it easier for foreign private issuers [1] (FPIs) to deregister their securities and terminate the associated reporting obligations under Section 12(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act). When it becomes effective, new Rule 12h-6 will make the process of exiting the US capital markets simpler, more certain, and more streamlined for FPIs. Under the current rules, deregistration is dependent on the number of US security holders, which has proven difficult for many FPIs to measure. Under the new rules, however, the test for whether an FPI can deregister will require a comparison of the average daily trading volume (the ADTV) of the class of securities to be deregistered in the U.S. to the worldwide ADTV for that class of securities. In addition, under the new rules FPIs will be able to permanently terminate, rather than suspend, Exchange Act reporting obligations. We have prepared a brief summary of these new rules. Please read it here. Does an M&A Transaction Inadvertently Trigger a Prospectus Requirement in the EU?by Craig Tanner In today's global economy, it is common for companies of all sizes and in all industries to have operations in multiple countries. An increasing majority of these companies offer stock awards to the employees of their global operations. When analyzing the potential liabilities and compliance requirements in an M&A transaction, it is important for an acquiring company to consider whether the acquisition of the target company's global operations and the assumption or substitution of the employee stock awards will trigger securities, tax, currency exchange, labor, and data privacy issues. These requirements may be triggered when the acquiring company enters a new country, when it expands its work force in a country, or when there is the assumption of different types of stock awards granted by the target company. In this article, we address the potential securities notice and disclosure requirements in the EU member states. Read the full article here. Should Your Company Adopt a Stock Recharge Arrangement with a Foreign Subsidiary?by Sang Kim and Trina Oettinger Companies acquiring the stock of foreign targets or targets with foreign subsidiaries may wish to consider the benefits having the foreign company's employees become a part of the acquirer's stock compensation plan and implementing a "stock recharge arrangement" between the acquirer and the foreign subsidiary. A stock recharge arrangement is an agreement between a US parent corporation and a foreign subsidiary whereby the foreign subsidiary agrees to reimburse the parent corporation for the costs associated with issuing the parent company's stock to the subsidiary's employee pursuant to an equity incentive compensation plan. If the parent and subsidiary corporations comply with requirements set forth by regulations issued under Section 1032 of the Internal Revenue Code (Section 1032 regulations), then the recharge payment will be treated for US tax purposes as payment to the parent corporation in consideration for its stock. This means the recharge payment will not be taxable to the parent corporation as a dividend or otherwise. For our readers, we have prepared a brief overview of this issue. Read the overview here. Recent DealsAmerican Real Estate Partners, L.P. to Acquire Lear CorporationDLA Piper represented American Real Estate Partners, L.P. (NYSE: ACP) (AREP) in connection with its entry into an agreement and plan of merger with Lear Corporation (NYSE: LEA) pursuant to which AREP would acquire all of the issued and outstanding shares of Lear in an all cash transaction valued at approximately $5.3 billion, including the assumption of debt. When the transaction is complete, Lear stockholders will receive $36 in cash per share. Lear is a leading global supplier of automotive seating, electronics, and electrical distribution systems and AREP is a diversified holding company controlled by Carl C. Icahn and engaged in a variety of businesses including gaming, real estate, and home textiles. The transaction will be financed in part by a $3.6 billion credit facility with Bank of America, N.A. Closing is expected to occur by the end of the second quarter of 2007. PHH Corporation To Be Acquired by GE Capital Solutions; The Blackstone Group To Acquire PHH Mortgage OperationsDLA Piper represented PHH Corporation in the negotiation of the acquisition of PHH by GE Capital Solutions, the business-to-business leasing, financing and asset management unit of General Electric, in an all-cash transaction valued at approximately $1.8 billion. Including assumption of debt, the transaction is valued at $9.3 billion. In conjunction with this transaction, GE has entered into an agreement to sell the mortgage operations of PHH Corporation to an affiliate of The Blackstone Group, a global private investment and advisory firm. The transaction is subject to approval by PHH stockholders and certain regulatory bodies, as well as various other closing conditions. PHH is a leading outsource provider of mortgage and vehicle fleet management services. Its subsidiary PHH Mortgage is one of the top ten retail originators of residential mortgages in the United States, and its subsidiary PHH Arval is a leading fleet management services provider in the United States. The First American Corporation Acquires CoreLogic Systems, Inc.DLA Piper represented CoreLogic Systems, Inc. in its combination with the Real Estate Solutions subsidiary of The First American Corporation (NYSE: FAF) on February 2, 2007. Based in Sacramento, CoreLogic is the leading provider of residential mortgage risk management and fraud protection technology and services to the US mortgage banking industry. Corelogic's stockholders received cash consideration of US$100 million and an 18 percent stake in the new entity with combined 2006 revenue of approximately US$326 million. DLA Piper previously represented CoreLogic in a $50 million preferred stock investment by TA Associates in 2004. Nightingale Informatix to Acquire VantageMedDLA Piper is representing VantageMed Corporation (OTCBB: VMDC) in its acquisition by Nightingale Informatix Corporation (TSX: NGH), a Canadian health care software company. VantageMed is a Sacramento, California-based developer of software products and services that assist physicians, anesthesiologists, behavioral health professionals, and other health care providers in the operation of their practices and organizations. The acquisition is structured as a cash-out reverse triangular merger at a price of $0.75 per common share. DLA Piper and its predecessors has represented VantageMed since 1999, including its initial public offering in 2000. [1] A "foreign private issuer" is defined as an issuer that is incorporated or organized under the laws of a foreign jurisdiction that either has (i) 50 percent or less of its outstanding voting securities held by US residents; or (ii) if more than 50 percent of its outstanding securities held by US residents, then none of the following are true: (a) a majority of the issuer's executive officers or directors are US residents or citizens; (b) more than 50 percent of the issuers' assets are located in the US; and (c) the issuer's business is administered principally in the US.
Published by DLA Piper US LLP Circular 230 Notice: In accordance with Treasury Regulations which became applicable to all tax practitioners as of June 20, 2005, please note that any tax advice given herein (and in any attachments) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of (i) avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. This publication is intended to provide clients with information on recent legal developments. It should not be construed as legal advice or legal opinion on specific facts. Pursuant to applicable Rules of Professional Conduct, it may constitute advertising. You are receiving this communication because you are a valued client or friend of DLA Piper US LLP.
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Mergers and Acquisitions Newsletter
