Yes, you are reading it correctly:
>Am I reading correctly that Veritas can effectively choose to sell added shares to Seagate
holders in lieu of cash (just what everyone wants!!
SInce my posting, SEG has filed (today) again, this time the final one before the proxies are put in the mail. Here is the lates on the stock/cash deal. Note that if VRTS wants to keep the money, they can just increase the shares of VRTS SEG shareholders get (thereby decreasing the SEG peoples' cash):
Based upon the market prices of VERITAS common stock and Seagate's
investment securities as of August 22, 2000, Seagate's estimated cash balance as
of July 28, 2000 and the total number of fully-diluted outstanding shares of
Seagate common stock as of June 30, 2000, Seagate's stockholders would receive
$5.85 per share in cash and $51.67 per share in VERITAS common stock if VERITAS
elects to retain no cash; $3.75 per share in cash and $53.77 per share in
VERITAS common stock if VERITAS elects to retain $500 million of cash; and $2.70
per share in cash and $54.82 per share in VERITAS common stock if VERITAS elects
to retain $750 million of cash. These amounts are only estimates. The actual
cash and share amounts will not be determined until shortly before the
completion of the merger, although the 109,330,300 shares of VERITAS to be
received in the merger are fixed. For a more detailed description of how the
cash and stock amounts are determined,
[snip]
Q: WHAT WILL I RECEIVE FROM THE MERGER?
A: As a result of the merger each of Seagate's stockholders will receive their
proportionate share of:
- 109,330,300 shares of VERITAS common stock; and
- a number of shares of VERITAS common stock determined by dividing the
aggregate negotiated discount to the average market prices of investment
securities of Gadzoox Networks and Lernout & Hauspie held by Seagate
shortly before the completion of the merger, by the average closing
price per share of VERITAS common stock for the five consecutive trading
days ending two trading days immediately prior to the completion of the
merger.
The fixed number of 109,330,300 shares of VERITAS common stock to be issued
to Seagate's stockholders represents a negotiated discount of approximately
14.6% with respect to the 128,059,966 shares of VERITAS common stock
currently held by Seagate through a Seagate subsidiary.
The exact number of shares of VERITAS common stock to be issued in exchange
for these investment securities will be determined based upon the respective
market prices of VERITAS common stock and the investment securities shortly
before the completion of the merger. The negotiated discount from market
value of 40% and the reduction for estimated taxes that will be applied to
these investment securities reflect the view that these investment
securities may not be readily tradeable in the hands of VERITAS, and that
any sale of these investment securities by VERITAS will be subject to
applicable federal and state income taxes. VERITAS agreed to acquire these
investment securities in connection with the merger because the private
equity group
was not willing to acquire those investment securities for cash in
connection with the leveraged buyout.
Since entering into the merger agreement through August 22, 2000, Seagate
has sold all of its SanDisk Corporation stock and Veeco Instruments stock,
realizing gross proceeds of $375.8 million. Seagate currently believes that
it may be unable to sell any of its shares of stock in Gadzoox Networks or
Lernout & Hauspie until after the anticipated completion of the merger due
to contractual and legal restrictions on Seagate's ability to sell those
investment securities. These restrictions will continue to apply following
the merger and represent part of the reason for the negotiated discount
being applied to these securities in the merger. However, to the extent that
Seagate is able to sell these shares prior to the completion of the merger,
Seagate's stockholders will realize the value of the cash proceeds in the
merger, less any taxes payable by Seagate in connection with any sale,
rather than the discounted value being applied to Seagate investment
securities in the merger. The market value and negotiated discounts based
upon a discounted post-tax value for these securities, excluding 297,120
shares of Lernout & Hauspie held in escrow, based on August 22, 2000 closing
prices is:
ISSUED MARKET VALUE DISCOUNTED VALUE NO. OF SHARES HELD
------ ------------ ---------------- ------------------
(IN MILLIONS)
<S> <C> <C> <C>
Gadzoox Networks..... $ 48.5 $30.2 5,274,015
Lernout & Hauspie.... $118.4 $58.5 3,574,369
</TABLE>
In connection with the merger between Seagate and a VERITAS subsidiary and
as additional consideration payable upon the completion of the merger, each
of Seagate's stockholders will also be entitled to receive their
proportionate share of cash equal in amount to:
- approximately $1.235 billion of the $2 billion of the cash received by
Seagate (less the amount of rollover equity, as described beginning on
page 90 of this document) in connection with the leveraged buyout; and
- all of Seagate's other cash on hand at the completion of the merger
after deducting from $150 million to $300 million to be withheld and
deposited in a trust pending the resolution of some Seagate tax audits,
and an additional amount necessary to satisfy Seagate's estimated tax
liabilities, satisfy tax withholding obligations resulting from the
acceleration of Seagate options in connection with the merger, redeem
Seagate's existing indebtedness in connection with the leveraged buyout,
and pay Seagate's transaction expenses.
We currently estimate this net cash amount to be approximately $5.85 per
share based on Seagate's estimated cash balance at July 28, 2000 and
assuming that VERITAS does not make the elections described in the following
paragraph.
VERITAS has the right to elect to reduce this cash portion of the
consideration payable in connection with the merger by either $500 million
or $750 million. If VERITAS makes this election, VERITAS would issue
additional shares of VERITAS common stock with an equivalent market value
based upon the average market price of VERITAS common stock shortly before
the time the election is made. As a result, Seagate's stockholders may
realize some of the value of the leveraged buyout in the form of VERITAS
common stock, rather than cash. In the event that VERITAS elects to reduce
the cash portion of the merger consideration by either $500 million or $750
million, the net cash available for distribution to Seagate stockholders at
the completion of the merger will be either approximately $3.75 or $2.70,
respectively.
[snip to end]
It goes on, but basically: SEG's other holdings will be discounted big-time so that shareholders do _not_ get nearly their worth. VRTS and VRTS alone can decide it if it want to keep cash and just tack on some more shares to ex-SEG shareholders.
For someone not to vote at all is the same as voting against.
I'm waiting for the institutional holders to start speaking.
Lynn |
