Handled Properly, Going Private is an Option for Undervalued Tech Companies

Apr 05, 2001, 01:00 ET from Foley & Lardner

    TAMPA, Fla., April 5 /PRNewswire/ -- Once viewed as the darlings of Wall
 Street, many technology companies are realizing that going public was,
 perhaps, an ill-advised move that has placed them in an unstable investment
 environment with their true worth grossly undervalued.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20010118/FLTH001LOGO-b )
     "The result of this 20/20 hindsight is a growing interest in going
 private," says Martin A. Traber, head of Foley & Lardner's corporate division
 for Florida.  "More companies are willing to undergo the rigors of a
 public-to-private conversion if it means they can once again be valued for the
 technology they produce rather than the price of their stock."
     Foley & Lardner's Florida corporate and securities practice, with offices
 in Jacksonville, Orlando, Tallahassee, Tampa and West Palm Beach, has built a
 strong track record of representing both private and public companies, with an
 additional concentration on online infrastructure companies, as well as
 technology and other companies that are migrating all, or part of their
 business operations to the Internet.
     According to Traber, disgruntled shareholders see the re-purchase of stock
 and a subsequent transition to being privately held as the company's best
 opportunity to be fairly valued in today's market.
     "Major shareholders are tired of being punished by the market, which they
 believe is grossly undervaluing the company's stock.  They see re-purchasing
 stock using company funds as a way to correct the situation," adds Matthew J.
 Foster, a partner with Foley & Lardner in Tampa.  "Obviously, companies with
 substantial underutilized working capital or high levels of cash flow are in a
 better position to go private, but they need to be aware of the regulatory
 constraints imposed upon such transactions."
     According to Foster, there are four primary regulatory provisions a
 company planning to go private must heed:
 
     1. Rule 13e-3 and other provisions under the Exchange Act impose
 disclosure requirements upon public companies intending to go private.
 Whether the transaction is consummated by way of a tender offer, a "squeeze-
 out" (in which by operation of law minority shareholders have their shares
 cancelled or redeemed), or a combination of an issuer tender offer followed by
 a squeeze-out, the Exchange Act also imposes certain differing notification
 and timing requirements.
     2. Many states have passed laws regulating "affiliated transactions" that
 make it more difficult to complete transactions such as changing from public
 to privately held status.  In Florida, for example, unless a regulatory
 exemption is available, a two-thirds vote of non-controlling shares is
 required to do a squeeze-out.
     3. The "dissenting shareholders" provision of various states' corporate
 laws could apply to a public/private transaction, allowing the squeezed-out
 shareholders to go to court to dispute the purchase price.
     4. The Board of Directors of the corporation must always insure that they
 fulfill their fiduciary duties in voting to go private.
 
     "Taking a company private requires a very thorough, granular knowledge of
 securities law," says Traber.  "It's absolutely critical that a company retain
 experienced legal advisors long before deciding to go through with the
 transaction."
     Foley & Lardner has more than 900 attorneys and offices in Chicago;
 Denver; Detroit; Jacksonville, Fla.; Los Angeles; Madison and Milwaukee, Wis.;
 Orlando, Fla.; Sacramento, San Diego and San Francisco, Calif.; Tallahassee
 and Tampa, Fla.; Washington, D.C., and West Palm Beach, Fla., as well as in
 Brussels, Belgium.  Its six firm wide departments include Business Law, Health
 Law, Intellectual Property, Litigation, Regulatory and Tax and Individual
 Planning.  The firm's Web site can be found at www.foleylardner.com.
 
 

SOURCE Foley & Lardner
    TAMPA, Fla., April 5 /PRNewswire/ -- Once viewed as the darlings of Wall
 Street, many technology companies are realizing that going public was,
 perhaps, an ill-advised move that has placed them in an unstable investment
 environment with their true worth grossly undervalued.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20010118/FLTH001LOGO-b )
     "The result of this 20/20 hindsight is a growing interest in going
 private," says Martin A. Traber, head of Foley & Lardner's corporate division
 for Florida.  "More companies are willing to undergo the rigors of a
 public-to-private conversion if it means they can once again be valued for the
 technology they produce rather than the price of their stock."
     Foley & Lardner's Florida corporate and securities practice, with offices
 in Jacksonville, Orlando, Tallahassee, Tampa and West Palm Beach, has built a
 strong track record of representing both private and public companies, with an
 additional concentration on online infrastructure companies, as well as
 technology and other companies that are migrating all, or part of their
 business operations to the Internet.
     According to Traber, disgruntled shareholders see the re-purchase of stock
 and a subsequent transition to being privately held as the company's best
 opportunity to be fairly valued in today's market.
     "Major shareholders are tired of being punished by the market, which they
 believe is grossly undervaluing the company's stock.  They see re-purchasing
 stock using company funds as a way to correct the situation," adds Matthew J.
 Foster, a partner with Foley & Lardner in Tampa.  "Obviously, companies with
 substantial underutilized working capital or high levels of cash flow are in a
 better position to go private, but they need to be aware of the regulatory
 constraints imposed upon such transactions."
     According to Foster, there are four primary regulatory provisions a
 company planning to go private must heed:
 
     1. Rule 13e-3 and other provisions under the Exchange Act impose
 disclosure requirements upon public companies intending to go private.
 Whether the transaction is consummated by way of a tender offer, a "squeeze-
 out" (in which by operation of law minority shareholders have their shares
 cancelled or redeemed), or a combination of an issuer tender offer followed by
 a squeeze-out, the Exchange Act also imposes certain differing notification
 and timing requirements.
     2. Many states have passed laws regulating "affiliated transactions" that
 make it more difficult to complete transactions such as changing from public
 to privately held status.  In Florida, for example, unless a regulatory
 exemption is available, a two-thirds vote of non-controlling shares is
 required to do a squeeze-out.
     3. The "dissenting shareholders" provision of various states' corporate
 laws could apply to a public/private transaction, allowing the squeezed-out
 shareholders to go to court to dispute the purchase price.
     4. The Board of Directors of the corporation must always insure that they
 fulfill their fiduciary duties in voting to go private.
 
     "Taking a company private requires a very thorough, granular knowledge of
 securities law," says Traber.  "It's absolutely critical that a company retain
 experienced legal advisors long before deciding to go through with the
 transaction."
     Foley & Lardner has more than 900 attorneys and offices in Chicago;
 Denver; Detroit; Jacksonville, Fla.; Los Angeles; Madison and Milwaukee, Wis.;
 Orlando, Fla.; Sacramento, San Diego and San Francisco, Calif.; Tallahassee
 and Tampa, Fla.; Washington, D.C., and West Palm Beach, Fla., as well as in
 Brussels, Belgium.  Its six firm wide departments include Business Law, Health
 Law, Intellectual Property, Litigation, Regulatory and Tax and Individual
 Planning.  The firm's Web site can be found at www.foleylardner.com.
 
 SOURCE  Foley & Lardner