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was delivered to petitioner at closing.4
Prior to the closing, approximately 80 percent of
petitioner's stock was beneficially owned, assuming conversion of
certain preferred stock, by L'Air Liquide S.A. (L'Air Liquide), a
French corporation. Approximately 2 percent of petitioner's
stock was owned by officers and directors of petitioner. The
remaining 18 percent of petitioner's stock was publicly owned and
was traded on the over-the-counter market. After the closing,
4We note that the percentage of post-July 1978 earnings provision of the
Contract was not literally followed. On brief, petitioner explains this as
follows:
We point out, for purposes of completeness, that Chemetron's
contractual obligation to deliver 50 percent of the pre-tax
earnings of the IGD Division from July 3, 1978 to the day
immediately preceding the closing merely reflected the parties'
initial expectation (ultimately unrealized) that the closing would
take place in the third quarter of 1978, but before the record
date for the third quarter LAC dividend. That is, the parties
expected that Chemetron would be receiving the full third quarter
dividend from LAC even though it would only have owned the LAC
stock for a portion of the third quarter. Thus, the "50 percent
of pre-tax earnings" amount referred to in the Contract merely
refers to (i) the 25 percent of pre-tax earnings balancing, or
mirror, amount negotiated by the parties, plus (ii) an additional
25 percent of pre-tax earnings from the beginning of the third
quarter dividend period to the anticipated closing date,
representing the portion of the third quarter LAC earnings that
would be paid as a dividend to Chemetron after the (originally
anticipated) closing date even though allocable to a period prior
to which Chemetron would actually own the relevant LAC shares. It
is apparent that the parties sought carefully and minutely to
negotiate the economics of the transaction. However, the closing
of the transaction ultimately did not take place prior to the
record date for the third quarter dividend for 1978, as the
parties had initially expected. Rather, as a result of the
protracted FTC investigation, the closing actually took place on
March 28, 1979--i.e., at the close of the first quarter of 1979,
but after the record date for the first quarter dividend.
Therefore, Chemetron never had to "disgorge" a portion of a
dividend allocable to a period during which it did not actually
own the LAC stock, and no "50% of pre-tax earnings" amount ever
had to be calculated or paid.
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