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the largest retail financial institutions in the Midwest. On
November 7, 1986, Federal, through another of its subsidiaries,
Commercial Federal Investment Associates, Inc. (Commercial),
acquired all of FIA's outstanding stock from Mr. Rafanello. The
purchase price, approximately $5.3 million, included a 25-percent
premium over FIA's book value.42
After the acquisition, FIA operated its business affairs with
no significant changes. Mr. Rafanello remained FIA's president
and CEO. At this time, FIA had 70 to 75 employees and financed $50
million of new equipment leases per year.43
Federal became FIA's source of equity financing, making funds
available in the form of short-term intercompany loans. FIA had
a $40 million line of credit with CFSLA, which it used to obtain
funds for the purchase of equipment. Loans made under this credit
line were secured by the equipment and the lease revenues.
FIA achieved higher residual values after its acquisition by
Federal than prior to the acquisition.
C. Petitioner's Acquisition of FIA
On December 29, 1988, Norwest Leasing, Inc. (NLI), one of
petitioner's affiliates, made an exploratory proposal to purchase
42 Mr. Rafanello testified that the 25-percent premium was
paid for FIA's intangible assets.
43 By 1988, FIA financed more than $100 million of new
equipment leases.
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