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Tracinda, and TBS (Option) (collectively, the transaction
documents). The transaction documents provided for:
(1) TBS' acquisition of MGM (MGM Purchase);3
(2) MGM's sale of all the shares in UA to Tracinda; and
(3) Tracinda's sale of shares in UA to some of MGM's former
public shareholders (Subscribing Public) and to certain UA
executives.4 The agreed price for UA was equal to $9 cash per
share,5 and the agreed price of MGM was $29 cash per share.
The consideration for the MGM shares was altered in October
1985 and again in January 1986. At the conclusion of the
transaction, on March 25, 1986, the consideration for the MGM
shares was $20 cash and one share of TBS Series A preferred stock
(TBS Preferred Stock) for each MGM share.
Prior to the negotiations, MGM had approximately $400
million of public debt outstanding in the form of 10-percent
senior subordinated notes due April 15, 1993 (MGM Notes). The
conditions of issue of the MGM Notes are contained in an
indenture dated April 15, 1983 (the MGM Indenture). On August
3The mechanism that accomplished the reverse triangular
subsidiary merger is not in issue in this case.
4Pursuant to a prospectus and subscription agreement, 14.3
percent of the UA shares acquired by Tracinda were sold to the
Subscribing Public for $9.18 per share. A total of 6.43 percent
of the said UA shares was sold to UA executives.
5Under the transaction documents, the capital of UA was to
be recapitalized so that it mirrored the number of shares issued
by MGM.
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