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Sirius XM Holdings Inc. Message Board

  • sixnomad sixnomad Jan 6, 2013 9:25 AM Flag

    Reverse Morris Trust Examples...

    Verizon wished to sell its access lines to Fairpoint. Rather than simply selling these assets alone to Fairpoint, however, Verizon created a subsidiary (to which it sold these assets) and distributed the shares of this new subsidiary to Verizon's shareholders. They then completed a Reverse Morris Trust with Fairpoint, where the original Verizon shareholders had a majority ownership of the newly merged company and the Fairpoint management ran the new company. Verizon was able to divest their access lines in a tax free manner as they continued to focus on higher growth wireless business.

    Procter & Gamble Co. was planning to sell its Pringles line of snacks to Diamond Foods in a leveraged, reverse Morris Trust split-off. The Pringles business would be transferred to a separate subsidiary which would assumed approximately $850 million of debt. However, the two companies were unable to finalize the deal, and in February 2012 Procter & Gamble found another buyer in the Kellogg Company.

    Procter & Gamble used a similar transaction structure when it sold Folgers coffee to J.M. Smucker in 2008.

    Sentiment: Strong Buy

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    • my question is: is this a good thing for siri investors?

      • 2 Replies to mipguru
      • I suspect that one of following would happen:

        1.) LMCA stockholders will get one share of the new company for each share of LMCA. This would be equal to the percentage of value that LMCA has in SIRI. The shares of the other SIRI holders will be adjusted accordingly in price if need be.

        2.) LMCA stockholders receive shares in the new company proportionally to the shares they hold in SIRI. I think this is least likely.

        There could be some other kind of proportional arrangement. I just do not know what it would be. If the dealis structure in such a way that LMCA stockholders get more than what LMCA proportionally owns of SIRI, there would be a big battle. Partial shares that cannot be accomodated should receive a cash payment.

      • Mipguru aske: my question is: is this a good thing for siri investors?

        In the long run it seems good for Siri shareholders. This will be great for lmca shareholders since they (under an RMT) will get Siri's shares. Every share Siri will equal a share of the new company. I don't know about the price though

3.97+0.02(+0.51%)May 2 4:00 PMEDT