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that “If the conditions to reaching an agreement are satisfied,
the aggregate purchase price will be $95,000,000”, subject to
adjustment for cash left in ML Leasing, for the value of
residuals as determined by independent appraisers, and for other
specified adjustments. The letter of intent also stated:
It is understood that this letter of intent merely
constitutes a statement of our mutual intentions with
respect to the proposed acquisition and does not
contain all matters upon which agreement must be
reached in order for the proposed acquisition to be
consummated. A binding commitment with respect to the
proposed acquisition will result only from execution of
definitive agreements, subject to the conditions
expressed therein.
Following execution of the nonbinding letter of intent, both
Inspiration and Merrill Parent hired outside appraisers to value
the lease portfolio.15
On July 29, 1986, Merrill Parent issued a news release to
its employees announcing that it had entered into a letter of
intent for the sale of a portion of its leasing operations to
Inspiration. Merrill Parent announced that the sale, if
consummated, would result in a realization of after-tax gain of
at least $70 million and was scheduled to close at the end of
15During July and August 1986, petitioner also executed
various transfers within the consolidated group to remove assets
from ML Leasing before its sale to Inspiration. By resolutions
dated July 31 and Aug. 1, 1986, ML Leasing’s board of directors
authorized payment of a dividend to ML Capital Resources
consisting of all the capital stock of five subsidiaries of ML
Leasing, intercompany receivables, cash, and other assets. These
distributions are not at issue in this case.
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