Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. TAMINCO Corp (1547063) 10-Q published on Nov 06, 2014 at 8:44 am
Reporting Period: Sep 29, 2014
The Consumation of the Merger is subject to a number of customary closing conditions under the Merger Agreement, including, among others: (i) Taminco and Eastman receiving duly executed copies of the Written Consent (as defined in the Merger Agreement); (ii) no injunction by any court or other tribunal of competent jurisdiction which prohibits the consummation of the Merger having been entered and continuing to be in effect and no Governmental Entity (as defined in the Merger Agreement) of competent jurisdiction having enacted or enforced any statute, rule, regulation, executive order, decree or other order (whether temporary, preliminary or permanent), which (a) is in effect and (b) has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger; (iii) the Regulatory Consents (as defined in the Merger Agreement) under each of (a) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (b) the foreign antitrust or competition clearances set forth in the Merger Agreement; and (c) any other foreign antitrust or competition clearances in any foreign country in which Eastman and the Company mutually agree is required in connection with the Merger, in each case, will have been obtained; and (iv) twenty (20) days will have elapsed since the Information Statement (as defined in the Merger Agreement) will have been mailed to the Company’s stockholders, and the consummation of the Merger will be permitted by Regulation 14C of the Securities and Exchange Act of 1934 (the “Exchange Act”) (including Rule 14c-2 promulgated under the Exchange Act). Eastman has entered into a support agreement (the “Support Agreement”) with certain affiliated investment funds of Apollo, who own a majority of Taminco’s common stock, pursuant to which Apollo has agreed, on the terms and subject to the conditions set forth in the Support Agreement, to act by written consent to approve and adopt the Merger Agreement and the transactions contemplated thereby. Each party’s obligation to consummate the Merger is also subject to certain customary representations and warranties of Eastman, Merger Sub and the Company and the compliance with certain covenants by the parties to the Merger Agreement and is also subject to there not having occurred, since June 30, 2014 through the date of the Merger Agreement, a Company Material Adverse Effect (as defined in the Merger Agreement). Taminco has agreed to conduct its business and the business of its subsidiaries in the ordinary course of business and to use commercially reasonable efforts to preserve intact its business organization and the organization of its subsidiaries and preserve intact their relationships with significant customers, suppliers and employees until the earlier of the consummation of the Merger or the termination of the Merger Agreement.
In connection with the Merger Agreement, we incurred $6 million of merger-related expenses, including legal, financial advisor and accounting fees, during the three and nine months ended September 30, 2014. These costs were recorded to Other Operating Expenses in the Condensed Consolidated Statements of Operations.
On July 11, 2014, the Company and Kemira Oyj entered into an agreement to reduce the purchase price of the Acquisition by approximately $5 million to reflect an adjustment to the working capital amounts. This adjustment was remitted to the Company from Kemira Oyj on July 15, 2014 and is reflected in the preliminary fair values below. The Company expects to evaluate any additional impact on the purchase price allocation and finalize the opening balance sheet within the acquisition period.
Income tax expense (benefit) for the three and nine months ended September 30, 2014 was a benefit of $13 million and $3 million, respectively. Income tax expense (benefit) for the three and nine months ended September 30, 2013 was an expense of $8 million and a benefit of $8 million, respectively. Taminco calculates the tax provision for interim periods using an estimated annual effective tax rate methodology which is based on a current projection of full-year earnings before taxes amongst different taxing jurisdiction and adjusted for the impact of discrete quarterly items. The estimated annual effective tax rate differs from the U.S. statutory rate of 35% due to state taxes, the domestic manufacturing deduction, differential tax rates in various non-U.S. jurisdictions in which the Company operates, and operations in non-U.S. jurisdictions where the Company is not able to defer taxation in the U.S. The Company has incurred pretax income for the period from January 1, 2014 to September 30, 2014, however, has recorded certain discrete items that have significantly impacted the tax rate. During the third quarter of 2014, the Company’s evaluation of our tax position as well as completion of our 2013 Federal tax returns resulted in the Company claiming foreign tax credits rather than deducting foreign taxes. Consequently, the Company recorded a benefit for the current and prior year foreign tax credits and in addition revalued certain of its deferred tax assets and liabilities related to entities where it cannot defer U.S. taxation to reflect this change. This resulted in a discrete benefit of $21 million to be recorded during the third quarter of 2014. This benefit is the primary driver of the change in effective tax rate during both the three and nine months ended September 30, 2014. During the nine months ended September 30, 2013, the Company incurred a pretax loss and has recorded a tax benefit. The tax benefit in 2013 also reflects certain discrete items including legislative changes enacted during the period. The income tax expense for the three month period ended September 30, 2013 was also impacted by an out of period adjustment related to non-cash foreign exchange gains and losses on intercompany debt of $3 million. The Company does not believe that this out of period adjustment is material to the condensed consolidated financial statements.
On September 11, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Eastman Chemical Company (“Eastman”) and Stella Merger Sub Corporation (“Merger Sub”), a wholly owned subsidiary of Eastman. Pursuant to the Merger Agreement, Merger Sub will merge with and into Taminco, on the terms and subject to the conditions set forth in the Merger Agreement, with Taminco surviving the Merger as a wholly owned subsidiary of Eastman (the “Merger”). At the effective time of the Merger, each issued and outstanding share of common stock, par value $0.001 per share, of Taminco, outstanding immediately prior to the effective time other than any canceled or dissenting shares (as defined in the Merger Agreement) will be converted automatically into the right to receive $26.00 per share in cash, without interest. The consumation of the Merger remains subject to receipt of required regulatory approvals as well as other customary closing conditions. The transaction is expected to close before the end of 2014.