Opinion ID: 2773129
Heading Depth: 2
Heading Rank: 2

Heading: The Sale Process

Text: In 2005, Textron decided to sell its global fastening systems business segment through a two-stage competitive auction. In the first stage, potential buyers who signed a nondisclosure agreement were granted access to due diligence. In the second stage, Textron selected a subset of potential buyers to participate in an auction. Platinum Equity made an initial bid of $900 million in early March 2006. As Textron continued discussions with other potential buyers in the spring of 2006,7 Textron and Platinum Equity negotiated price and various provisions of the proposed Purchase Agreement. The Purchase Agreement was based on a bid draft crafted by Textron before it identified specific potential buyers. In the draft, Textron 5 After this litigation began, Platinum Equity sold Acument to Fontana Gruppo. See Platinum Equity Sells Acument to Fontana Gruppo, June 23, 2014, http://www.platinumequity.com/news/907/platinum-equity-sells-acument-to-fontana-gruppo. Textron filed a motion on July 24 requesting that we take judicial notice of the sale. This Court denied the motion on July 28, but granted Textron leave to address the issue in its reply brief, and entitled Acument to file a sur-reply brief in response. Because there is no dispute that Platinum Equity always intended to “flip” Acument, and the substantive arguments presented do not hinge on when a taxable benefit would accrue to Acument, only if there is such a benefit, it does not matter whether or not we take judicial notice of the sale. Further, according to Acument, only the equity of Acument‟s parent company was sold, so any change in Acument‟s basis since the sale from Textron is still unrealized. Sur-Reply Br. at 3. 6 The Firm: About Platinum Equity, http://www.platinumequity.com/company (last visited Dec. 21, 2014). 7 Indeed, negotiations between Textron and Platinum Equity were suspended for a short period of time in early May because Textron entered into an exclusivity contract with another bidder. Opinion at . 3 agreed to indemnify the buyer for certain pre-closing liabilities (“Losses”), including those related to tax in § 4.6(h)(ii), specified breaches by Textron in § 6.1(b)(i-ii), environmental issues in § 6.1(b)(iii), and retained litigation in § 6.1(b)(iv). But under § 6.1(d), the buyer was required to “reduce[]” any loss to Textron by reimbursing it for insurance proceeds, payments by third parties, or – most relevant to this litigation – “(iii)(C) any Tax Benefit of the [buyer] attributable to such Loss.”8 “Tax Benefit” is later defined in the Agreement as: the present value of any refund, credit or reduction in otherwise required Tax payments, including interest payable thereon, which present value shall be computed as of the Closing Date or the first date on which the right to the refund, credit or other Tax reduction arises or otherwise becomes available to be utilized . . . assuming that such refund, credit or reduction shall be recognized or received in the earliest possible taxable period (without regard to any other losses, deductions, refunds, credits, reductions or other Tax items available to such party).9 Asserting that § 6.1(d)(iii)(C) was “very seller friendly” and risked requiring an offset even when it had not accrued “actual tax savings [that] year,” Platinum Equity first proposed eliminating the provision.10 Textron rejected that change. Platinum Equity then proposed changing the definition of “Tax Benefit” to “actual tax savings . . . in the first taxable year in which an item is properly includible in a tax return.” Textron again rejected the suggestion. But these proposed revisions were among many made by Platinum Equity during the negotiations process, and the Superior Court determined that 8 App. to Opening Br. at 123 (Purchase Agreement § 6.1(d)(iii)(C)). 9 App. to Opening Br. at 142 (Purchase Agreement § 8.1) (emphasis added). 10 Opinion at . 4 that neither party considered the scope of the tax benefit offset to be a material issue.11 The relevant provisions in the final contract thus remained materially unaltered from the bid draft.12 After extensive negotiations about a number of issues, including responsibility for outstanding contingent liabilities, the parties agreed on a final purchase price of $630 million and executed the Purchase Agreement on August 11, 2006.13