- 7 -
cash to invest in the partnership, and that the cost of borrowing
to finance the investment was likely to exceed the return on a
pretax basis. Pohlschroeder also was not persuaded that the
partnership would serve a business purpose of Colgate. When
Pohlschroeder related the proposal to Steve Belasco (Belasco),
Colgate's vice president of taxation, the latter agreed: But for
the tax benefits, the transaction did not accomplish anything
useful for the company. Belasco also was concerned that the
transaction did not have sufficient economic substance to
withstand scrutiny, and that the transaction's legal, financial,
and accounting complexities would require broad interdepartmental
support within Colgate. Absent a connection to Colgate's
business, Belasco believed, the necessary support would not be
forthcoming.
Merrill's proposal was not the first that Colgate considered
to minimize the tax impact of the Kendall sale. During the
previous summer, while the sale was pending, a cross-functional
team from Colgate's treasury, accounting, and tax departments had
considered at least 11 tax-saving proposals, including investing
in low-income housing or property eligible for rehabilitation
credits and creating a charitable foundation. All of these
proposals were rejected.
After the initial meeting between Colgate and Merrill,
Fields, on behalf of Merrill, contacted a law firm for advice on
the tax consequences of a CINS transaction. In relevant part,
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011