MALL -- Here is language from the S-1. Offering 1,580,000 shares to the public. Total outstanding after the offering will be 8,909,883. Therefore, the Company is retaining the rest (7,329,883). Intent is to distribute to the public (spinoff). Language excerpt below. I believe based on outstanding MALL shares, it will be about .73 shares per MALL share. Should be a tax-free spinoff.
SEPARATION FROM THE PARENT
BACKGROUND OF THE SEPARATION AND DISTRIBUTION
The Parent has announced that, subject to certain conditions, the Parent
intends to consummate the Offering, to separate the Company, which owns and
operates the Parent's online auction business, from the Parent's other
operations and businesses and to distribute to its stockholders all of the
Common Stock owned by the Parent in no event prior to 180 days after
consummation of the Offering. See "Risk Factors--Risk of Noncompletion of a
Tax-Free Distribution." The Separation will establish the Company as a stand-
alone entity with objectives separate from those of the Parent. The Company
intends to focus its resources and management emphasis on the operations and
markets it views as critical to its long-term success as a stand-alone entity.
The Company and the Parent intend to enter into a Separation and Distribution
Agreement (the "Separation and Distribution Agreement") and certain other
agreements providing for the Offering, the Separation, the Distribution and
the provision by the Parent of certain interim services to the Company, and
addressing employee benefit arrangements, and tax and other matters. See
"Certain Transactions." On the Offering Closing Date, the Parent will own
approximately 82.3% of the outstanding Common Stock (80.1% if the Underwriters
exercise their over-allotment option in full).
Several business purposes underlie the proposed Distribution. The Company
desires to access the capital markets, and the Company and the Parent believe
that the raising of funds through consummation of the Offering provides the
most effective source of capital for the Company and is part of the initial
capitalization of the Company as a stand-alone entity. The Parent and the
Company believe that the Offering and the Distribution will provide each
entity with the most prudent capital structures to realize their respective
growth strategies as separate, stand-alone entities, based on the Company's
and the Parent's prospective capitalization and financing requirements,
acquisition strategies, working capital requirements, projected cash flows
from operations and desired credit ratings, respectively.
In addition to raising capital for the Company, the Company and the Parent
believe that the Distribution will enhance the Company's ability to implement
its growth and operating strategies. The Company believes that its future
growth would be enhanced if its management were compensated on a separate
basis from the Parent. The consummation of the Offering will better position
the Company to retain key employees by allowing such employees to participate
in the corporate growth of the Company as a stand-alone, publicly-traded
entity through stock options and other targeted incentives tied to the
performance of the Company. Similarly, the Parent believes that its future
growth would be enhanced if management of its remaining business segments were
more focused on such segments without also being responsible for the online
auction segment. Finally, upon completion of the Distribution, holders of
Parent Common Stock as of the record date for the Distribution will be
entitled to receive a dividend of Common Stock without the payment of further
consideration, although the Parent expects the market value of shares of
Parent Common Stock to diminish upon effecting the Distribution to reflect the
value (per share of Parent Common Stock) of the shares of Common Stock
distributed by the Parent.
The consummation of the Distribution will also remove current restrictions
on the Company's growth as a result of certain contractual restrictions of the
Parent that are applicable to the Parent and its subsidiaries. For example,
certain of the Parent's contractual relationships with manufacturers prevent
the Parent and its subsidiaries, including the Company, from selling such
manufacturers' computers and computer-related products at discounted prices,
which has prevented the Company from obtaining such products on a close-out or
refurbished basis and selling them in the Company's auctions. In addition,
under the Parent's contractual relationships with certain of its vendors,
neither the Parent nor its subsidiaries, including the Company, can sell the
vendor's products outside the U.S. As a result of the Distribution, the
Company would no longer be subject to these restrictions.
The Company believes that its capitalization after consummation of the
Offering will be sufficient to satisfy its future working capital, capital
expenditures and other obligations for at least the next 12 months. See "Risk
Factors--Future Capital Requirements; Need For Additional Capital; Absence of
Parent Funding." 23
CONDITIONS TO THE DISTRIBUTION
The Company has received the PwC Opinion to the effect that the Distribution
will qualify as a tax-free distribution for federal income tax purposes under
Section 355 of the Code, and will not result in recognition of any gain or
loss for federal income tax purposes to the Parent, the Company, or the
Parent's or the Company's respective stockholders. The Parent also may apply
for a Letter Ruling.
In accordance with the Separation and Distribution Agreement, completion of
the Distribution will be subject to the satisfaction, or waiver by the Parent
Board, of the following conditions: (i) the PwC Opinion shall have been
obtained, in form and substance satisfactory to the Parent, and be confirmed
at the time of Distribution; (ii) if the Parent decides to seek a Letter
Ruling, the Letter Ruling shall have been obtained and remain effective
consistent with the conclusions reached in the PwC Opinion, and such ruling
shall be in form and substance satisfactory to the Parent, in its sole
discretion; (iii) any material Governmental Approvals and Consents (as such
terms are defined in the Separation and Distribution Agreement) necessary to
consummate the Distribution shall have been obtained and shall be in full
force and effect; (iv) no order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Distribution shall be in effect, and no
other event outside the control of the Parent shall have occurred or failed to
occur that prevents the consummation of the Distribution; and (v) no other
events or developments shall have occurred subsequent to the closing of the
Offering that, in the judgment of the Parent Board, would result in the
Distribution having a material adverse effect on the Parent or on the
stockholders of the Parent. The Parent Board will have the sole discretion to
determine the Distribution Date at any time commencing after the Offering
Closing Date but in no event prior to 180 days after consummation of the
Offering. The Parent has agreed to consummate the Distribution, subject to the
satisfaction of the conditions set forth above. The Parent may terminate the
obligation to consummate the Distribution if the Distribution has not occurred
by December 31, 1999, unless extended by the Parent and the Company. In
addition, the Separation and Distribution Agreement may be amended or
terminated at any time prior to the Distribution Date by the mutual consent of
the Company and the Parent. See "Risk Factors--Risk of Noncompletion of a Tax-
Free Distribution" and "Certain Transactions."
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