IV. The Transaction
VTOD and SSI seek authority for VTOD to acquire SSI, which, in turn, has a 100% ownership interest in the Five PSCs. This transfer of control is to take place pursuant to an agreement, a copy of which was tendered under seal along with non-public financial information as part of an August 2, 2006 motion for a protective order.
The motion states good grounds for the requested relief.3 Thus, all information tendered under seal should remain sealed for a period of two years from the date of this order, and during that period should not be disclosed to anyone other than Commission staff except on the execution of a mutually accepted nondisclosure agreement or further order or ruling of the Commission, the Assigned Commissioner, the assigned Administrative Law Judge (ALJ), or the ALJ then designated as the Law and Motion Judge.
The change of control will be effected pursuant to a reverse triangular agreement by which SSI will merge into a subsidiary of VTOD, established solely for purposes of this transaction, will stand as the surviving corporation, and will thereby become a subsidiary of VTOD.4 SSI shareholders will be compensated in either cash or convert their shares of SSI to stock in an entity which will hold a minority interest in VTOD, as detailed in the agreement.
The change of control is structured so that customers will not notice the change. After the proposed transfer of control is completed, the Five PSCs will continue to be wholly-owned subsidiaries of SSI and continue to provide their authorized on-call passenger stage services and Charter Party Carrier services.
No change in the current management structure of SSI is anticipated to occur as a result of this transaction. SSI management will also benefit from the experience of the management of Veolia Transportation, the parent of VTOD. A detailed description of the management experience of SSI and Veolia Transportation is set forth in Exhibit I of the application.
Applicants tendered under seal recent financial statements of SSI and its Five PSCs and Veolia Transportation to substantiate that applicants possess significant financial resources to permit the Five PSCs to continue to offer a high level of service to travelers in California.
Applicants expect that approval of the transfer of control will enable each of the Five PSCs to benefit from economies of scale that will permit them to operate more efficiently and thus to compete more effectively. For example, while the present management of SSI will continue to operate the system, the consolidated cost of vehicle liability insurance will be significantly reduced because of the size of the Veolia Transportation fleet of vehicles.
3 The motion recites that the applicants are not public entities and the information, if disclosed, could place applicants at a competitive disadvantage, in particular because the proposed transaction is subject to approval and has not yet closed. Hence, public disclosure of this material could place applicants and their existing investors in a position of significant disadvantage in the event that the proposed transaction is not consummated and negotiations for sale are undertaken with other potential purchasers.
4 The merger subsidiary will be merged in to the acquired entity (SSI) with SSI standing as the surviving corporation.
