Merrill Lynch & Co., Inc. & Subsidiaries - Page 18




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          million dividend to ML Capital Resources consisting of cash                 
          received from ML Asset Management, plus other cash, receivables,            
          and certain liabilities.  After removal of the 1986 retained                
          assets, the summary represented that Merrill Parent would then be           
          in a position to sell the principal investments business portion            
          of ML Leasing.                                                              
               The summary unequivocally identified Inspiration as the                
          purchaser of ML Leasing’s stock, described Inspiration, and                 
          stated that “In return for the stock of ML Leasing, we will                 
          receive $126 million in cash (subject to adjustments for residual           
          value appraisals) from the purchaser, Inspiration Resources                 
          Corporation.”  The summary also explained how the sale price was            
          determined,13 quantified the after-tax income and the tax benefit           
          that would result from the sale, explained the tax risks of the             
          transaction, and recommended the creation of a $37 million tax              






               13The sale price was determined by calculating the present             
          value of the cashflow stream generated by ML Leasing’s assets               
          ($42 million), discounting the pretax cashflow to reflect the               
          value of the cashflow to Inspiration ($143 million), calculating            
          the value of Inspiration’s NOLs ($101 million), and adding to the           
          present value of the cashflow stream a premium of $53 million               
          (representing a split of the benefits arising from Inspiration’s            
          NOLs).  The resulting base sale price ($95 million) was then                
          increased by the amount of cash to be left in ML Leasing                    
          (estimated to be $31 million) to arrive at a total sale price of            
          $126 million (subject to adjustment for residual value                      
          appraisals).                                                                





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