ALJ/MCK/hl2 Mailed 12/4/2006
Decision 06-11-042 November 30, 2006
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Joint Application of NOS Communications, Inc. (U-5251-C), Blue Ridge Telecomm Systems LLC (U-6925-C), Affinity Networks Incorporated (U-5229-C), NOSVA Limited Partnership (U-5434-C) and Samuel P. Delug for Approval of Change in Control. |
Application 06-06-022 (Filed June 22, 2006) |
OPINION APPROVING CHANGE IN CONTROL
In this decision we approve an uncontested joint application for approval, pursuant to section 854 of the Public Utilities Code, of a change of control with respect to four affiliated telecommunications companies that hold certificates of public convenience and necessity (CPCNs) from this Commission: (1) NOS Communications, Inc. (NOS), (2) Blue Ridge Telecomm Systems LLC (Blue Ridge), (3) Affinity Networks Incorporated (ANI), and (4) NOSVA Limited Partnership (NOSVA). Under the proposed change of control, Samuel P. Delug (Delug), who currently owns one quarter of each company,1 would purchase the interests of Robert A. Lichtenstein (Lichtenstein), who currently owns half of each company.
The application states that Delug "is already the most active major shareholder in the management of the four certified companies," and that the proposed transaction "will simply permit Mr. Delug to hold an equity interest in the four companies that is commensurate with his role in management." (Application, p. 5.) The application also states that Lichtenstein's role in the companies "has been entirely passive for many years," and that he has "determined that his ownership of interests in the four entities is inconsistent with his investment objectives." (Id. at 5, 8.) The application also emphasizes that the proposed change "will be completely transparent to the customers of the carriers," and "will not result in any change in the management of NOS, ANI, NOSVA or Blue Ridge." (Id. at 1-2.)
A. Background
The main reason given by the parties for the proposed change of control is the dilution in Delug's ownership brought about by his recent divorce. The application notes that originally, Delug and Lichtenstein each held 50% of the shares of the NOS and ANI, as well as 50% interests in Blue Ridge. Delug and Lichtenstein also each held a 49.5% limited partnership interest in NOSVA; the remaining 1% interest in NOSVA was held by NOS Communications, Inc. of Virginia (NOS Virginia), the general partner of NOSVA. Delug and Lichtenstein also each held 50% of the shares of NOS Virginia.
The application then explains the effect of Delug's divorce as follows:
"In late 2004, as a result of a property settlement in connection with a dissolution of marriage, Mr. Delug's shares in NOS and ANI were divided between Mr. Delug and his former wife, such that Mr. Delug and his former wife each held 25% of the shares of NOS, ANI and Blue Ridge and Mr. Lichtenstein, who has [had] little or no involvement with the management of the companies for years, holds the remaining 50%."
"A similar change in ownership structure occurred with respect to NOSVA[,] such that Mr. Lichtenstein holds a 49.5% limited partnership interest in NOSVA while Mr. Delug holds a 24.75% limited partnership interest in NOSVA." (Id. at 7; footnote omitted.)
The application continues that if all of the necessary regulatory approvals can be obtained, Delug plans to purchase -- pursuant to a stock purchase agreement that has been filed under seal as Exhibit A to the application -- all of Lichtenstein's interests in the four companies. This will result in Delug having 75% of the shares of NOS and ANI, as well as a 75% interest in Blue Ridge. Delug would also hold a 74.25% limited partnership interest in NOSVA, as well as a 75% interest in NOS Virginia, the general partner of NOSVA. (Id. at 7-8.)
The application emphasizes that the change in control would have no effect upon the day-to-day operations of the four companies:
"[T]he transaction between the two shareholders will be completely transparent to the customers of the carriers. While it will result in a technical change of control, it will not result in any change in the management of NOS, ANI, NOSVA or Blue Ridge. Mr. Delug, the shareholder acquiring voting control by virtue of the acquisition of shares at issue, already effectively controls the management of the companies." (Id. at 1-2.)2
In the remainder of the joint application, applicants have set forth the other information required by Rule 3.6 of the Commission's Rules of Practice and Procedure in an application to authorize a change of control.
1 According to the application, Delug currently owns 25% of the shares of both NOS and ANI. He owns a 24.75% limited partnership interest in NOSVA, and a 25% interest in Blue Ridge. In addition, he owns a 25% interest in NOS Communications Inc. of Virginia, an entity that is the general partner of NOSVA. (Application, p. 4.)
2 However, the application also states that "while the transaction for which authority is sought herein will not, in and of itself, result in any change in the nature of the operation of the companies, it is the intent of NOS and ANI to develop a wholesale product to market to carrier-customers." (Id. at 6.)
