High Tech

Case :   Taxable and Non-Taxable Offers for High Tech April 16, 2012

Group:   Sonia Angola, Marilyn Cross, Radoslaw Dworak, Michelle Jun, Anna Lynch
Vikas Pasricha, Lorenzo Luis Posadas, Ashok Ramadoss, Erica Servello, Mark Stankevitz

General questions:
  1. What is your estimate of the net asset basis (tax assets – tax liabilities) of High-Tech?
$287 Million, see below
Gross Book Assets |   $650 |
Less DTA | -$100 |
Plus DTA/tax rate   100/35% |   $286 |
Less DTL/tax rate   80/35% | -$229 |
= Gross Assets for Tax Purposes |   $607 |
| |
Gross Book Liabilities | $400 |
Less DTL | -$80 |
= Gross Liabilities for Tax Purposes | $320 |
| |
Net Tax Assets = Gross Assets for Tax – Gross Liabilities for Tax | $287 M |

  2. How much future taxable income generated in the U.S. can be offset with existing High-Tech net operating loss carryovers?
future taxable income that be offset with NOLS is $100M/35% = $286 M
  3. Given their acquisition offers, which of the bidders do you think perceives its share value as most “undervalued?”
The bidder that believes its stock is most undervalued is the one that offers cash, which is LISI.
  4. Which of the bidders has the opportunity to “create” tax deductible Goodwill as a result of the offer they’ve made?
LISI has the opportunity to create tax deductible Goodwill via the 338 election if it chooses.   The other offers from ACME and Allied are structured for High-Tech shareholders to avoid tax (368 structure).
Allied offer—questions:
  1. What “type” of tax structure is this, taxable or non-taxable. If non-taxable which section, e.g., 368(A), (B), or (C)?
This is a non-taxable structure, and is part of section 368(A).
  2. What basis would Allied take in High-Tech stock?
Allied has no basis in High-Tech stock in this tax-free transaction, defined under section 368(A), as the target company is liquidated, its stock cancelled, and all of its assets and liabilities are assumed by the... [continues]

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