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transactions would enure to Colgate. They believed that the
costs, though high in absolute terms, were reasonable in relation
to the benefits that Colgate expected to receive from the
partnership.
Liability management benefits would have been difficult to
quantify for purposes of this comparison. The tax benefits,
however, were calculable and greatly exceeded the expected
transaction costs. Although the Perpetual Partnership Cost
Component Analysis does not explain the derivation of the $25.47
million net present value that appears on the top line, this
figure must be attributable almost entirely to tax benefits. A
succession of summaries, cash-flow projections, and flip-chart
presentations that Colgate received from Merrill between August
and mid-October 1989, demonstrated how the sale of $200 million
private placement notes for $140 million cash and $60 million
market value of LIBOR Notes would result in $107 million taxable
gain for the partnership and a net taxable loss for Colgate of
approximately $90 million. If the foreign partner's interest
were acquired and the LIBOR Notes sold within the 2-year period
remaining for carryback of capital losses to the year of the
Kendall divestiture, the present value of the tax savings
achieved by this transaction, discounted at prevailing interest
rates of 8-1/2 to 9-1/2 percent, would be roughly $25 million.
In a series of internal meetings and meetings with Merrill
representatives during September and early October 1989, the
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