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million as a result of an increase in the reserve for losses and
a net reduction in expected future residual values.
On June 1, 1987, the GATX Finance Committee approved the
proposal to acquire the capital stock of ML Capital Resources for
a purchase price of $63.3 million, subject to certain specified
conditions. The GATX Finance Committee recommended that the
proposed transaction be forwarded to the GATX board of directors.
G. Continued Negotiations
After executing the nonbinding letter of intent, petitioner
and GATX/BCE continued their negotiations. In conjunction with
GATX/BCE’s due diligence review of the lease portfolio,
petitioner and GATX/BCE agreed that it was impractical to examine
each lease separately because the lease portfolio consisted of
such a large number of relatively small leases. Therefore, they
agreed to use a “statistical sampling technique”, whereby the
parties would jointly pick a certain number of leases at random
to examine in significant detail and compare them to the
representations made by Merrill Parent in the 3-volume offering
memorandum. The results of the “statistical sample” were not
satisfactory to GATX/BCE; i.e., a larger than expected portion of
the leases did not coincide with Merrill Parent’s representations
in the 3-volume offering memorandum.
From May 22 through June 25, 1987, negotiations continued in
order to accommodate the adjustments revealed by the due
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