SECURITIES AND EXCHANGE COMMISSION
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
July 11, 2016
Via Facsimile and U.S. Mail
Glenn C. Campbell, Esq.
Hogan Lovells US LLP
100 International Drive I Suite 2000
Baltimore, Maryland 21202
RE:
Lockheed Martin Corporation I Exchange Offer
Dear Mr. Campbell:
We are responding to your letter dated July 11, 2016 addressed to Michele M. Anderson
Nicholas P. Panos, and Katherine Wray as supplemented by telephone conversations with
the Staff, with regard to Lockheed Martin Corporation's request for no-action relief. To
avoid having to recite or summarize the facts set forth in your letter, our response is
attached to the enclosed copy of your letter. Unless otherwise noted, capitalized terms in
this letter have the same meaning as in your letter.
On the basis of the representations and facts presented in your letter, the Staff of the
Division of Corporation Finance will not recommend that the Commission take
enforcement action under Rules 13e-4(d)(l ), 13e-4(e)(3 ), 13e-4(f)(l )(ii) or 14e-1 (b) under
the Exchange Act if Lockheed conducts the Exchange Offer in the manner described in
your letter. In issuing these no-action positions, we considered the following facts, among
others:
•
Lockheed's disclosure of a specified dollar value of Splitco common stock that
tendering Lockheed security holders will receive in exchange for a dollar value of
tendered Lockheed common stock (subject to an upper limit on the exchange ratio);
•
The Pricing Mechanism for determining the number of shares of Splitco common
stock to be received in exchange for shares of Lockheed common stock will be
disclosed in the tender offer materials disseminated to security holders;
•
The Pricing Mechanism will remain constant throughout the duration of the
Exchange Offer, and ifthere is a change in the Pricing Mechanism, the Exchange
Offer will remain open for at least ten business days thereafter;
•
Lockheed will provide a toll-free number and a website that its security holders can
use to obtain daily indicative exchange ratios and, after announcement of the final
exchange ratio, the final exchange ratio (including whether the upper limit to the
exchange ratio is in effect);
Glenn C. Campbell, Esq.
Hogan Lovells US LLP
July 11, 2016
Page 2 of2
•
Lockheed will publish the final exchange ratio (including an announcement
whether the limit on the exchange ratio is in effect) in a press release and on the
website no later than 9:00 a.m., New York City time, on the second trading day
immediately preceding the expiration date, file the information as a Rule 425 filing
pursuant to Rule 165 of the Securities Act of 193 3, and file an amendment to its
Schedule TO on the same date setting forth the same information;
•
Lockheed will make available a notice of withdrawal in its printed materials, and
will disclose the procedures and methods by which tenders and withdrawals must
be made up to the expiration of the offer;
•
Lockheed common stock and Leidos common stock are listed on the NYSE; and
•
Lockheed's view that the trading prices for Leidos common stock are an
appropriate proxy for the price of Splitco common stock.
The foregoing no-action positions are based solely on your representations and the facts
presented in your letter dated July 11, 2016, as supplemented by telephone conversations
with the Commission Staff. This relief is strictly limited to the application of the rules
listed above to use of the Pricing Mechanism. Lockheed should discontinue the Exchange
Offer pending further consultations with the Staff if any of the facts or representations set
forth in your letter change.
We also direct your attention to the anti-fraud and anti-manipulation provisions of the
federal securities laws, including Sections 9(a), lO(b) and 14(e) of the Exchange Act and
Rules lOb-5 and 14e-3 thereunder. Responsibility for compliance with these and any other
applicable provisions of the federal securities laws rests with the participants in the
Exchange Offer. The Division of Corporation Finance expresses no view with respect to
any other questions that the Exchange Offer may raise, including, but not limited to, the
adequacy of the disclosure concerning, and the applicability of any other federal or state
laws to, the Exchange Offer. This response expresses the Division's position on
enforcement action only and does not express any legal conclusion on the question
presented.
Sincerely,
For the Division of Corporation
Finance,
Michele M. Anderson
Associate Director, Legal
Division of Corporation Finance
Hogan Lovells US LLP
100 International Drive
Suite 2000
Baltimore, MD 21202
T +1410659 2700
F +1410659 2701
www.hoganlovells.com
July 11, 2016
Securities Exchange Act of 1934
Rules 13e-4(d)(1), 13e-4(e)(3),
13e-4(f)(1)(ii) and 14e-1(b)
BY EMAIL
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Mergers and Acquisitions
100 F Street, N. E.
Washington, DC 20549-3628
Attn: Michele M. Anderson, Associate Director (Legal)
Nicholas P. Panos, Senior Special Counsel
Katherine Wray, Attorney-Advisor
Dear Ms. Anderson, Mr. Panos and Ms. Wray:
We are writing on behalf of our client, Lockheed Martin Corporation
("Lockheed Martin"), in connection with an exchange offer (the "Exchange Offer")
that will be commenced following the effectiveness of the Registration Statement (as
defined below). Lockheed Martin and Leidos Holdings, Inc. ("Leidos") have entered
into an Agreement and Plan of Merger (the "Merger Agreement") dated January 26,
2016 and amended on June 27, 2016, among Lockheed Martin, Leidos, Abacus
Innovations Corporation, a wholly-owned subsidiary of Lockheed Martin ("Splitco"),
and Lion Merger Co., a wholly-owned subsidiary of Leidos ("Merger Sub"), pursuant
to which, subject to the terms and conditions of the Merger Agreement and a
Separation Agreement dated January 26, 2016 and amended on June 27, 2016,
between Lockheed Martin and Splitco (the "Separation Agreement"), Lockheed
Martin will separate and combine its government information technology and
technical services businesses, which have been realigned in its Information Systems
& Global Solutions (IS&GS) business segment (collectively, the "Business") with
Leidos in a Reverse Morris Trust transaction (the "Transaction"). In the Transaction,
(i) Lockheed Martin will transfer the Business to Splitco and receive a one-time
special cash payment of $1.8 billion, (ii) Lockheed Martin may distribute Splitco's
stock to Lockheed Martin's stockholders, at Lockheed Martin's option, by way of a
pro rata dividend or an offer to exchange all of the Splitco shares for shares of
Lockheed Martin common stock (the "Distribution"), and (iii) Merger Sub will merge
with and into Splitco, with Splitco as the surviving corporation (the "Merger").
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Lockheed Martin is pursing the exchange offer.
Upon consummation of the
Transaction, the shares of Splitco common stock then outstanding will automatically
be converted into the right to receive approximately 77 million shares of Leidos
common stock and will represent approximately 50.5% of the outstanding shares of
Leidos common stock on a fully diluted basis. Leidos' existing stockholders will
continue to hold approximately 49.5% of the outstanding Leidos common stock on a
fully diluted basis. If necessary, the exchange offer will be immediately followed by
a clean-up spinoff.
The Exchange Offer adopts substantially the same pricing mechanism as
the one used by (i) Baxter International Inc. ("Baxter") in its exchange offer (the
"Baxter Exchange Offer") with respect to the common stock of Baxalta Incorporated
(the "Baxter Pricing Mechanism"), (ii) General Electric Company ("GE") in its
exchange offer (the "GE Exchange Offer") with respect to the common stock of
Synchrony Financial (the "GE Pricing Mechanism"), (iii) Bristol-Myers Squibb
Company ("BMS") in its exchange offer (the "BMS Exchange Offer") with respect to
the common stock of Mead Johnson Nutrition Company (the "BMS Pricing
Mechanism") and (iv) Procter & Gamble Company ("Procter & Gamble") in its
exchange offer (the "Procter & Gamble Exchange Offer") with respect to the shares
of The J.M. Smucker Company as part of a Reverse Morris Trust transaction (the
"Procter & Gamble Pricing Mechanism"), all of which employed "Day 18" pricing
mechanisms, as described below.
The proposed pricing mechanism for the
Exchange Offer is also similar to the one used by (i) Weyerhaeuser Company
("Weyerhaeuser") in its exchange offer (the "Weyerhaeuser-Tri Pointe Exchange
Offer") with respect to the common stock of Tri Pointe Homes, Inc. as part of a
Reverse Morris Trust transaction (the "Weyerhaeuser-Tri Pointe Pricing
Mechanism"), (ii) CBS Corporation ("CBS") in its exchange offer (the "CBS
Exchange Offer") with respect to the common stock of CBS Outdoor Americas Inc.
(the "CBS Pricing Mechanism"), (iii) Pfizer Inc. ("Pfizer") in its exchange offer (the
"Pfizer Exchange Offer") with respect to the Class A common stock of Zoetis Inc.
(the "Pfizer Pricing Mechanism"), (iv) Halliburton Company ("Halliburton") in its
exchange offer (the "Halliburton Exchange Offer") with respect to the common stock
of KBR, Inc. (the "Halliburton Pricing Mechanism"), (v) Weyerhaeuser in its exchange
offer (the "Weyerhaeuser-Domtar Exchange Offer") with respect to the common stock
of Domtar Corporation (the "Weyerhaeuser-Domtar Pricing Mechanism"), (vi)
McDonald's Corporation ("McDonald's") in its exchange offer (the "McDonald's
Exchange Offer") with respect to the Class B Common Stock of Chipotle Mexican
Grill, Inc. (the "McDonald's Pricing Mechanism"), (vii) PPG Industries, Inc. ("PPG") in
its exchange offer (the "PPG Exchange Offer") with respect to the common stock of
Georgia Gulf Corporation as part of a Reverse Morris Trust transaction (the "PPG
Pricing Mechanism"), and (viii) Kraft Foods Inc. ("Kraft") in its exchange offer (the
"Kraft Exchange Offer") with respect to the common stock of Ralcorp Holdings, Inc.
as part of a Reverse Morris Trust transaction (such pricing mechanism, the "Kraft
Pricing Mechanism"), all of which employed "Day 20" pricing mechanisms, as
described below. The Baxter Exchange Offer, GE Exchange Offer, BMS Exchange
Offer, the Procter & Gamble Exchange Offer, the Weyerhaeuser-Tri Pointe Exchange
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Offer, the CBS Exchange Offer, the Pfizer Exchange Offer, the Halliburton Exchange
Offer, the Weyerhaeuser-Domtar Exchange Offer, the McDonald's Exchange Offer,
the PPG Exchange Offer and the Kraft Exchange Offer, are collectively referred to
herein as the "Similar Exchange Offers." 1
Rules 13e-4(d)(1), 13e-4(e)(3), 13e-4(f)(1)(ii) and 14e-1(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), require, among other things,
the specification of the consideration offered and the extension of the offer for ten
business days on a change in consideration.
Because the Exchange Offer
contemplates allowing investors two full trading days to consider the final exchange ratio
instead of ten business days, we respectfully request that the staff of the Securities and
Exchange Commission's (the "Commission") Division of Corporate Finance (the "Staff')
confirm that the Staff will not recommend that the Commission take enforcement action
pursuant to Rules 13e-4(d)(1), 13e-4(e)(3), 13e-4(f)(1)(ii) and 14e-1(b) under the
Exchange Act with respect to Lockheed Martin's use of the pricing mechanism
described below (the "Pricing Mechanism"). The issues presented are substantially
identical to those to which the Staff did not object in connection with the Baxter, GE,
BMS and Procter & Gamble Exchange Offers. The issues are also substantially
identical to those to which the Staff did not object in the Weyerhaeuser-Tri Pointe, CBS,
Pfizer, Kraft, Halliburton, Weyerhaeuser-Domtar, McDonald's, and PPG Exchange
Offers, but with a simplified time-table and procedures such as those used in the Procter
& Gamble Exchange Offer and by Lazard Freres & Co. ("Lazard") in its offer (the
"Lazard Offer") and TXU Corp ("TXU") in its offer (the "TXU Offer"). 2
I.
BACKGROUND
A. Parties to the Transaction
1. Lockheed Martin Corporation
Lockheed Martin is a Maryland corporation formed in 1995 by combining the
businesses of Lockheed Corporation and Martin Marietta Corporation. Lockheed Martin
is a global security and aerospace company principally engaged in the research, design,
development, manufacture, integration and sustainment of advanced technology
systems, products and services. Lockheed Martin also provides a broad range of
management, engineering, technical, scientific, logistics and information services. It
serves both U.S. and international customers with products and services that have
See Baxter International Inc. (avail. April 21, 2016), General Electric Company (avail. Oct. 19, 2015),
Bristol-Myers Squibb Company (avail. Nov. 16, 2009) and Procter & Gamble (avail. Oct. 8, 2008). See also The
Dow Chemical Company (avail. Sept. 2, 2015), Weyerhaeuser Company (avail. June 26. 2014), CBS
Corporation (avail. June 11, 2014), Pfizer Inc. (avail. May 22, 2013), Halliburton Company (avail. Mar. 21,
2007), Weyerhaeuser Company (avail. Feb. 23, 2007), McDonald's Corporation (avail. Sept. 27, 2006), PPG
Industries, Inc. (avail. Dec. 21, 2012) and Kraft Foods Inc. (avail. July 1, 2008).
2
See Lazard Freres & Co. (avail. Aug. 11, 1995) and TXU Corporation (avail. Sept. 13, 2004).
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defense, civil and commercial applications, with its principal customers being agencies
of the U.S. Government. Lockheed Martin's main areas of focus are in defense, space,
intelligence, homeland security and information technology, including cybersecurity.
Lockheed Martin employs approximately 125,000 people worldwide. Lockheed Martin
had approximately $46.1 billion in net sales for the year ended December 31, 2015.
Lockheed Martin is also a well-known seasoned issuer, whose common stock is
registered pursuant to Section 12(b) of the Exchange Act. Accordingly, it files with the
Commission periodic reports, proxy statements and other information relating to
Lockheed Martin's business, financial results and other matters. Lockheed Martin's
common stock is listed for trading on the New York Stock Exchange ("NYSE"). We
have been advised by Lockheed Martin that it is current in its periodic reporting
obligations under the Exchange Act.
As of March 27, 2016, there were 304,453,019 shares of Lockheed Martin
common stock, par value $1.00 per share, outstanding.
2. Abacus Innovations Corporation
Abacus Innovations Corporation, a Delaware corporation incorporated on
January 19, 2016 and referred to in this document as Splitco, is a direct, wholly-owned
subsidiary of Lockheed Martin that was organized specifically for the purpose of
effecting the Transaction. Splitco has engaged in no business activities to date and it
has no material assets or liabilities of any kind.
3. Leidos Holdings, Inc.
Leidos, incorporated in 2005, is a Delaware corporation having its principal
executive offices in Reston, VA, and serves as the holding company for its principal
operating company, Leidos, Inc., which was formed in 1969. Leidos is a science and
technology solutions leader working to address some of the world's toughest challenges
in national security, health and infrastructure. Its approximately 18,000 employees
support vital missions for government and commercial customers, develop innovative
solutions to drive better outcomes and defend digital and physical infrastructure from
"new world" threats. Leidos' common stock is listed for trading on the NYSE. Leidos
had approximately $5.09 billion in revenue for the 12 months ended January 1, 2016.
We have been advised by Leidos that it is current in its periodic reporting obligations
under the Exchange Act.
4. Lion Merger Co.
Lion Merger Co., a Delaware corporation incorporated on January 21, 2016 and
referred to in this document as Merger Sub, is a direct, wholly-owned subsidiary of
Leidos that was organized specifically for the purpose of effecting the Transaction.
Merger Sub has engaged in no business activities to date and it has no material assets
or liabilities of any kind.
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B. Purpose of the Transaction
In reaching a decision to approve the Merger Agreement and the Separation
Agreement and to proceed with the Transaction, the Lockheed Martin Board and senior
management, in consultation with its financial advisors, considered a variety of factors,
including, among other things, cost structure considerations, differences in business
models and contract types between the Business and Lockheed Martin's other
businesses, allowing the management of the Business and Lockheed Martin's other
businesses to pursue their own strategic objectives, potential synergies of combining the
Business and Leidos and the expectation that the Transaction generally would result in
a tax-efficient disposition of the Business for Lockheed Martin and its stockholders.
Lockheed Martin's and Leidos' reasons for the Transaction are more fully described in
the Prospectus (as defined below).
C. The Steps of the Transaction
The terms of the Exchange Offer are more fully described in the Prospectus (the
"Prospectus"), which is part of the Registration Statement on Form S-4 and Form S-1
(File No. 333-210797) (as amended, the "Registration Statement"), that has been filed
by Splitco to register the shares of Splitco common stock to be distributed in the
Distribution and to be offered in the Exchange Offer. In addition, Lockheed Martin will
file a Tender Offer Statement on Schedule TO (the "Schedule TO"), which will
incorporate by reference portions of the Prospectus. Set forth below is a description of
the key components of the Exchange Offer.
1. Separation, Issuance of Splitco Common Stock to Lockheed Martin,
/ncurrence of Splitco Debt and Splitco Cash Payment
Pursuant to the Separation Agreement, Lockheed Martin will transfer the
Business to Splitco and, in connection with this transfer, Splitco will issue to Lockheed
Martin additional shares of Splitco common stock. Following this issuance, subject to
adjustment in accordance with the Merger Agreement, Lockheed Martin will own
76,958,918 shares of Splitco common stock, which will constitute all of the outstanding
stock of Splitco. In addition, Splitco will incur new indebtedness in an aggregate
principal amount of approximately $1,841,450,000. Splitco will use a portion of the
proceeds of this loan to pay to Lockheed Martin a cash payment in the amount of
$1,800,000,000, subject to adjustment as provided in the Separation Agreement, in
connection with the transfer of the Business to Splitco. Splitco will use the balance to
pay certain fees and expenses related to such indebtedness.
2. Distribution - Exchange Offer
Lockheed Martin will offer to Lockheed Martin stockholders the right to exchange
all or a portion of their shares of Lockheed Martin common stock for shares of Splitco
common stock at a certain percent discount to the equivalent per-share value of Leidos
common stock, after giving effect to the amount of the Leidos Special Dividend (as
described below), based on the conversion in the Merger of each share of Splitco
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common stock into one share of Leidos common stock, subject to adjustment as
specified in the Merger Agreement. If the Exchange Offer is consummated but is not
fully subscribed, Lockheed Martin will distribute the remaining shares of Splitco common
stock on a pro rata basis to Lockheed Martin stockholders whose shares of Lockheed
Martin common stock remain outstanding after the consummation of the Exchange
Offer. Any Lockheed Martin stockholder who validly tenders (and does not properly
withdraw) shares of Lockheed Martin common stock for shares of Splitco common stock
in the Exchange Offer will waive their rights with respect to such tendered shares to
receive, and forfeit any rights to, shares of Splitco common stock distributed on a pro
rata basis to Lockheed Martin stockholders in the event the Exchange Offer is not fully
subscribed.
3. lncurrence of Leidos Debt
Prior to the closing of the Merger, Leidos, Inc., a wholly-owned subsidiary of
Leidos and its principal operating company, will incur new indebtedness in the form of a
$690,000,000 Term Loan A Facility and a $750,000,000 Revolving Credit Facility. The
proceeds of the Term Loan A Facility and up to $50,000,000 of borrowings under the
Revolving Credit Facility, together with cash on hand at Leidos, Inc. (which will not
exceed $500,000,000), will be used to pay the Leidos Special Dividend (as described
below), and additional proceeds of borrowings under the Revolving Credit Facility will be
used to (i) repay in full all outstanding indebtedness for borrowed money of Splitco (if
any) (other than the debt incurred by Splitco described above), (ii) repay in full all
indebtedness, and terminate all commitments, under the Amended and Restated Four
Year Credit Agreement dated as of March 11, 2011, among Leidos, as borrower,
Leidos, Inc., as guarantor, and Citibank, N.A., as administrative agent, the lenders, other
agents and other parties party thereto from time to time and (iii) pay the fees, costs and
expenses associated therewith.
4. Leidos Special Dividend
Prior to the consummation of the Merger, Leidos will declare a special dividend in
an amount equal to $13.64 per share to the holders of record of Leidos common stock
as of a record date prior to the closing date of the Merger (the "Leidos Special
Dividend"). Stockholders of Lockheed Martin who receive Splitco common stock in the
Distribution (whether by tendering shares of Lockheed Martin common stock in the
Exchange Offer or in connection with the pro rata distribution of any remaining shares of
Splitco common stock) that will be converted into Leidos common stock in the Merger
will not be entitled to receive the Leidos Special Dividend since the record date will be
prior to the date on which the Merger closes.
5. Merger
Immediately after the Distribution, Merger Sub will merge with and into Splitco,
whereby the separate corporate existence of Merger Sub will cease and Splitco will
continue as the surviving company and as a wholly-owned subsidiary of Leidos. In the
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Merger, each share of Splitco common stock will be converted into the right to receive
one share of Leidos common stock. Immediately after the consummation of the Merger,
approximately 50.5% of the outstanding shares of Leidos common stock are expected to
be held by pre-Merger Splitco (former Lockheed Martin) stockholders and approximately
49.5% of the outstanding shares of Leidos common stock are expected to be held by
pre-Merger Leidos stockholders on a fully diluted basis.
II.
THE EXCHANGE OFFER
Lockheed Martin is adopting the Pricing Mechanism (described below) for the
Exchange Offer. The terms of the Exchange Offer are more fully described in the
Prospectus. Participation in the Exchange Offer is voluntary, and none of Lockheed
Martin or Leidos will make any recommendation about whether holders of Lockheed
Martin common stock should participate. Directors and officers of Lockheed Martin may
participate in the Exchange Offer, but the terms of the offer do not provide them with any
advantage relative to other Lockheed Martin stockholders.
As in the Similar Exchange Offers, the Exchange Offer does not set forth a fixed
exchange ratio at the outset of the Exchange Offer. Rather, the Exchange Offer price is
expressed as a ratio of shares of Splitco common stock for each $100.00 in value of
Lockheed Martin common stock tendered pursuant to the Exchange Offer (subject to the
upper limit on the exchange ratio described below). This value relationship will reflect a
discount to the estimated value of Splitco common stock in order to encourage
participation in the Exchange Offer.
Consistent with the Similar Exchange Offers, the value of Lockheed Martin
common stock will be determined by Lockheed Martin by reference to the simple
arithmetic average of the daily volume-weighted average prices ("VWAP") on each of
the last three trading days (the "Averaging Period") ending on and including the third
trading day preceding the expiration date of the Exchange Offer period ("Valuation
Dates"), of Lockheed Martin common stock on the NYSE. The value of a share of
Splitco common stock will be determined by Lockheed Martin by reference to the simple
arithmetic average of the daily VWAP of Leidos common stock on the NYSE on each of
the Valuation Dates (since each share of Splitco common stock will be exchanged for
one share of Leidos common stock in the Merger), minus $13.64, which amount
represents the per share amount of the Leidos Special Dividend. Whereas in the
Weyerhaeuser-Tri Pointe, CBS, Pfizer, Kraft, Halliburton, Weyerhaeuser-Domtar and
McDonald's Exchange Offers, per share values of underlying stocks were determined by
reference to the daily VWAP of each stock during an averaging period ending on and
including the expiration date of the exchange offer, the Averaging Period, consistent with
the Baxter Exchange Offer, GE Exchange Offer, BMS Exchange Offer, the Procter &
Gamble Exchange Offer, the Lazard Offer and the TXU Offer, will end on and include the
third trading day preceding the expiration date, allowing investors two full trading days to
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consider the final exchange ratio and decide to tender or withdraw. 3 Consistent with
Baxter, GE, BMS, Procter & Gamble and the other Similar Exchange Offers, the trading
data to be used to set the value of Lockheed Martin common stock and Splitco common
stock will be the respective VWAPs of Lockheed Martin and Leidos common stock on
the NYSE on the Valuation Dates during the period beginning at 9:30 a.m., New York
City time (or such other time as is the official open of trading on the NYSE), and ending
at 4:00 p.m., New York City time (or such other time as is the official close of trading on
the NYSE), except that such data will only take into account adjustments made to
reported trades included by 4:10 p.m., New York City time. The daily VWAP will be as
reported by Bloomberg Finance L.P. and displayed under the heading Bloomberg
VWAP on the Bloomberg pages "LMT UN <Equity> VWAP" with respect to Lockheed
Martin common stock and "LOOS UN < Equity > VWAP" with respect to Leidos common
stock (or their equivalent successor pages if such pages are not available). The daily
VWAPs provided by Bloomberg Finance L.P. may be different from other sources of
VWAPs or investors' or security holders' own calculations of VWAPs. Based upon the
daily VWAP as reported by Bloomberg Finance L.P., Lockheed Martin will calculate the
simple arithmetic average of such VWAPs. Lockheed Martin believes that a three-day
VWAP-based pricing period offers stockholders a reasonable balance between the
objectives of providing the most current pricing practicable, while reducing price
distortions that could occur if prices were established at a single point in time.
Consistent with the Similar Exchange Offers, Lockheed Martin stockholders
participating in the Exchange Offer will receive a maximum number of shares of Splitco
common stock for each share of Lockheed Martin common stock accepted for
exchange, which limit will be established using the closing price for Lockheed Martin
common stock on the last trading day prior to the commencement of the Exchange
Offer, and a discount to the closing price for Leidos common stock on such date
(referred to as the "upper limit"). This upper limit is intended to ensure that a change in
the relative stock price of Lockheed Martin common stock and Leidos common stock,
whether as a result of an increase in the price of Lockheed Martin common stock, a
decrease in the price of Leidos common stock or a combination thereof, would not result
in an unduly high number of shares of Splitco common stock being exchanged for each
share of Lockheed Martin common stock accepted in this exchange offer. This is to
prevent a situation that might significantly reduce the benefits of the exchange offer to
Lockheed Martin and its continuing stockholders due to a smaller number of outstanding
shares being acquired by Lockheed Martin in this exchange offer. Lockheed Martin has
a share repurchase program designed to reduce share count. The split-off structure will
allow Lockheed Martin to reduce share count using Splitco common stock in the
exchange offer instead of cash, and the upper limit is designed to set a minimum level of
shares that will be repurchased by Lockheed Martin. No later than 9:00 a.m., New York
City time, on the second trading day immediately preceding the expiration date of the
Exchange Offer, Lockheed Martin will issue a press release, make a Rule 425 filing and
file an amendment to its Schedule TO with the Commission to announce the final
3
The Pricing Mechanism contemplates that the Exchange Offer will expire, unless extended, at 8:00
a.m. New York City time on the third business day following the last of the Valuation Dates rather than at the
end of the day on second business day following the last of the Valuation Dates.
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exchange ratio, whether the upper limit is in effect and the maximum amount of
Lockheed Martin common stock sought in the Exchange Offer, leaving Lockheed Martin
stockholders two trading days to tender or withdraw. Consistent with the Similar
Exchange Offers, the Exchange Offer will not include any minimum exchange ratio
because, were such a limit to be triggered, it would provide tendering stockholders with
a windfall return for Lockheed Martin common stock tendered and accepted.
Consistent with the Similar Exchange Offers, if, upon the expiration of the
Exchange Offer, Lockheed Martin stockholders have validly tendered more Lockheed
Martin common stock than Lockheed Martin is able to accept for exchange, Lockheed
Martin will accept for exchange the Lockheed Martin common stock validly tendered and
not withdrawn by each tendering stockholder on a pro rata basis (other than with respect
to odd-lot tenders). Lockheed Martin will first calculate a "Proration Factor", which will
equal (i) the total number of shares of Lockheed Martin common stock that Lockheed
Martin is able to accept (taking into account the final exchange ratio and the total
number of shares of Splitco common stock owned by Lockheed Martin) divided by (ii)
the total number of shares of Lockheed Martin common stock validly tendered and not
withdrawn (in all cases after adjustment for odd-lot tenders that are not subject to
proration, as described below). The Proration Factor will then be applied to each
Lockheed Martin stockholder with respect to the total number of shares of Lockheed
Martin common stock validly tendered by such Lockheed Martin stockholder pursuant to
the Exchange Offer and not withdrawn (except for holders of less than 100 shares of
Lockheed Martin common stock who validly tender all of their shares and elect not to be
subject to proration). The final proration will be adjusted as necessary to ensure the
exchange of all shares of Splitco common stock owned by Lockheed Martin.
Lockheed Martin believes that the trading prices for Leidos common stock are an
appropriate proxy for the trading prices of Splitco common stock because (i) prior to the
Distribution, Splitco will issue to Lockheed Martin a number of shares of Splitco common
stock such that the total number of shares of Splitco common stock outstanding
immediately prior to the Merger will be 76,958,918; (ii) in the Merger, each share of
Splitco common stock will be converted into the right to receive one share of Leidos
common stock; and (iii) at the Valuation Dates, it is expected that all the major
conditions to the consummation of the Merger other than those that will be
consummated on or immediately prior to the Closing Date (e.g., the Distribution) will
have been satisfied and the Merger will be expected to be consummated shortly
thereafter, such that investors should be expected to be valuing Splitco common stock
based on the expected value of Leidos common stock after the Merger without the
entitlement to the Leidos Special Dividend.
The Pricing Mechanism is disclosed in the Prospectus and will be constant
throughout the Exchange Offer. Any change in the Pricing Mechanism (including in the
upper limit described above) will be made no later than ten business days before
expiration of the offer (which may require an extension of the offer beyond the initial
expiration date) and would be published in a press release and in a Rule 425 filing with
the Commission with the press release also being included in an amendment to
Lockheed Martin's Schedule TO to be filed in connection with the Exchange Offer.
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The Exchange Offer commenced by Lockheed Martin will rely on traditional,
timely methods of disclosing the pricing information consistent with the "Day 18" pricing
mechanisms 4 used in the Baxter Exchange Offer, GE Exchange Offer, BMS Exchange
Offer, the Procter & Gamble Exchange Offer, the Lazard Offer and the TXU Offer.
Consistent with the Baxter Exchange Offer, GE Exchange Offer, BMS Exchange Offer,
the Procter & Gamble Exchange Offer, the Lazard Offer and the TXU Offer, Lockheed
Martin will make pricing information available as follows:
•
The information agent will maintain on Lockheed Martin's behalf a website at
www.edocumentview.com/LockheedMartinExchange that provides indicative
exchange ratios and calculated per-share values of Lockheed Martin
common stock and Splitco common stock, and calculated per share values
and dividend adjusted per share values of Leidos common stock. The
indicative exchange ratios will reflect whether the upper limit on the exchange
ratio, described above, would have been in effect. Since the Exchange Offer
pricing is based on the average daily VWAP over a three-day period,
consistent with existing precedent, indicative pricing will begin on the third
business day of the Exchange Offer period.
•
Indicative exchange ratios will also be available commencing on the third
business day of the Exchange Offer period and prior to the announcement of
the final exchange ratio by contacting the information agent for the Exchange
Offer at a toll-free telephone number disclosed in the Prospectus. 5
•
On each of the Valuation Dates, when the values of Lockheed Martin
common stock, Splitco common stock and Leidos common stock are
calculated for the purposes of this Exchange Offer, the website will show the
indicative calculated per-share values of Lockheed Martin common stock and
Splitco common stock, and calculated per share values and dividend
adjusted per share values of Leidos common stock, as calculated by
Lockheed Martin, which will be based on, with respect to each stock, (i) after
the close of trading on the NYSE on the first Valuation Date, the VWAPs for
that day, and (ii) after the close of trading on the NYSE on the second
Valuation Date, the VWAPs for that day averaged with the VWAPs on the
first Valuation Date.
On the first two Valuation Dates, the indicative
exchange rates will be updated no later than 4:30 p.m., New York City time.
4
"Day 18" pricing typically is referred to as a pricing mechanism where the final day of the valuation
period is the eighteenth business day of an exchange offer that is open for 20 business days and "Day 20"
pricing typically is referred to as a pricing mechanism where the final day of the valuation period is the
twentieth business day of an exchange offer that is open for 20 business days. In the case of the Exchange
Offer by Lockheed Martin, since the Exchange Offer period likely will be longer than 20 business days and the
Exchange Offer will expire at 8:00 a.m New York City time, references to "Day 18" in respect of the Exchange
Offer are to the third business day prior to the expiration date of the Exchange Offer period.
5
Disclosure of the indicative exchange ratios on the website will be accompanied by a statement that
the disclosure is for "informational purposes only" and that an offer is being made only by means of the
Prospectus. In addition, the information agent will be instructed to communicate that the offer is being made
only by means of the Prospectus.
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No indicative exchange ratio will be published or announced on the third
Valuation Date.
•
The final exchange ratio will be announced by press release and available on
the website by 9:00 a.m., New York City time, on the second trading day
immediately preceding the expiration date of the Exchange Offer and that
information and the press release will also be included in an amendment to
Lockheed Martin's Schedule TO filed on the same day. Following such
announcement, the final exchange ratio will also be available by contacting
the information agent at a toll-free telephone number disclosed in the
Prospectus. 6
Consistent with the Similar Exchange Offers, withdrawal rights will be available
throughout the Exchange Offer. Because the offer will expire at 8:00 a.m., New York
City time, on the expiration date and Lockheed Martin will announce the final exchange
ratio by 9:00 a.m., New York City time, on the second trading day immediately
preceding the expiration date, holders of shares of Lockheed Martin common stock will
have two full trading days to consider the final exchange ratio and decide to tender or
withdraw. In this regard, we note the following:
Ill.
•
Holders of shares of Lockheed Martin common stock will be able to send via
facsimile (through their brokers or similar institutions if they do not hold their
shares directly) notices of withdrawal to the exchange agent.
•
Lockheed Martin will make available to holders of shares of Lockheed Martin
common stock in printed materials a notice of withdrawal, and the procedures
for withdrawal will be explained in the Prospectus, including the times and
methods by which tenders and withdrawals must be made. 7
DISCUSSION
We respectfully request on behalf of Lockheed Martin that the Staff confirm that
the Staff will not recommend that the Commission take enforcement action pursuant to
Rules 13e-4(d)(1), 13e-4(e)(3), 13e-4(f)(1)(ii) and 14e-1(b) under the Exchange Act
(requiring, among other things, the specification of consideration offered and the
extension of the offer on a change in consideration) with respect to Lockheed Martin's
use of the Pricing Mechanism as described above. We believe that the Pricing
Mechanism is consistent with the protection of investors because it results in a fixed,
6
Disclosure of the final exchange ratios on the website will be accompanied by a statement that the
disclosure is for "informational purposes only" and that an offer is being made only by means of the Prospectus.
In addition, the information agent will be instructed to communicate that the offer is being made only by means
of the Prospectus.
7
As disclosed in the Prospectus, tenders and withdrawals are permitted up to the expiration of
the exchange offer. The final exchange ratio will have been published by press release at least two
business days prior to the expiration of the exchange offer and the website will be populated with
that information. In addition, the website will include daily VWAP trading prices for both Lockheed
Martin and Leidos on each of the last two trading days prior to the expiration of the exchange offer.
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constant dollar value exchange (subject to the limit on the exchange ratio described
above) and provides greater certainty about the ultimate return to investors and absolute
certainty about the maximum number of shares of Splitco common stock receivable per
share of Lockheed Martin common stock tendered. This approach is consistent with the
pricing mechanisms in the Baxter, GE, BMS and Procter & Gamble Exchange Offers,
which build on the pricing mechanisms in the other Similar Exchange Offers and the
other traditionally available pricing structures, including formula-based and "Dutch
auction" structures previously approved by the Staff, and provides investors with
advantages not available in those offers. In addition, the Pricing Mechanism adopts the
simplified timetable and procedures used in the Baxter Exchange Offer, GE Exchange
Offer, BMS Exchange Offer, the Procter & Gamble Exchange Offer, the Lazard Offer
and the TXU Offer, thereby ensuring that the investors have ample time to decide
whether to tender or withdraw.
A Fixed Exchange Ratios
The Pricing Mechanism allows investors to better predict the value they will
receive in the Exchange Offer than they would in an offer using the traditional pricing
method of a fixed exchange ratio. In fixed ratio offers, the return to investors depends
on the value at the time of expiration of the offer of both what is offered and what is
tendered. These values fluctuate independently and without constraint during the offer
period, and an investor only realizes the actual discount or premium initially embedded
in the exchange ratio if the prices of the underlying stocks at the expiration of the offer
are equal to their prices at the offer's commencement. Sophisticated investors may
seek at the start of the offer to lock in the initial discount through a variety of trading
strategies that, when implemented, could make them economically indifferent to
subsequent changes in trading prices for the stocks involved. Less sophisticated
investors, such as small retail investors, generally will not lock in the discount at the
offer's commencement. Instead, their participation decision may be more heavily
influenced by the relative prices of each stock at the offer's expiration, which may not
reflect the discount originally provided.
B. Formula-Based Exchange Ratios and Pricing Structures
For various reasons, including to mitigate the disadvantages of fixed ratio offers
and to permit a more current market valuation of the securities involved in an exchange,
market participants have sought, and the Staff has granted, relief under the tender offer
rules when the exchange ratio is based on a formula using trading data over a specified
period (typically ten trading days). 8 In Lazard, the first of these no-action letters, the
Staff nonetheless required that the exchange ratio be set no later than the second full
business day preceding the offer expiration. The Staff has extended the relief granted in
Lazard to other circumstances involving formula-based pricing, but in many instances
has continued to require that the final consideration be set no later than two trading days
prior to the expiration of the offer. For example, the Staff permitted AB Volvo ("AB
Lazard Freres & Co. (avail. Aug. 11, 1995). See also BBVA Privanza International (Gibraltar) Limited
(avail. Dec. 23, 2005); TXU Corporation (avail. Sept. 13, 2004); Epicor Software Corp. (avail. May 13, 2004);
and AB Volvo (avail. May 16, 1997).
8
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Volvo") to set the redemption price for AB Volvo common stock using a formula based
on volume-weighted average trading prices of that stock on the Stockholm Stock
Exchange on three specified days during a three-week period ending two U.S. trading
days before the expiration of the U.S. offer. 9 Similarly, the Staff permitted TXU to offer
to purchase certain equity-linked securities for a price fixed at least two days prior to
offer expiration and indexed to the daily VWAP of TXU's stock for the ten-day period
then ended. 10
1. "Day 18" versus "Day 20" Pricing
Consistent with the formulas used in the Baxter, GE, BMS, Procter & Gamble,
Lazard, AB Volvo and TXU Exchange Offers, the Pricing Mechanism uses an Averaging
Period ending on and including the third trading day preceding the expiration date,
providing for a two trading day window between pricing and offer expiration. This "Day
18" pricing reflects an effort to balance potentially conflicting considerations: on one
hand, the need for adequate dissemination of information about the absolute
consideration being offered to investors and, on the other hand, the desire to minimize
the artificially imposed exposure to market risk resulting from the imposition of an
arbitrary time delay between pricing and offer expiration. The result is that the final
exchange ratio in the Exchange Offer can and will be announced by 9:00 a.m., New
York City time, on the second trading day immediately preceding the expiration date,
allowing investors two full trading days to consider the final exchange ratio in the
Exchange Offer and decide to tender or withdraw at any time during that two trading day
period. Lockheed Martin intends to rely on traditional, timely methods of disclosure of
the final pricing and exchange ratio described herein consistent with the "Day 18" pricing
mechanisms used in the Baxter Exchange Offer, GE Exchange Offer, BMS Exchange
Offer, the Procter & Gamble Exchange Offer, the Lazard Offer and the TXU Offer, but
will provide special internet-based information concerning daily VWAPs once a day
during the Exchange Offer period, because that type of disclosure was required in the
other Similar Exchange Offers employing "day 20" pricing timetable.
2. Length of Averaging Period
Consistent with the Baxter, GE, BMS, Procter & Gamble, Weyerhaeuser-Tri
Pointe, CBS, Pfizer, Kraft, Halliburton and Weyerhaeuser-Domtar Pricing Mechanisms,
the Pricing Mechanism uses a three-day Averaging Period. We believe that the ten-day
averaging period used in the Lazard and TXU Offers is not as favorable to retail
investors as the three-day averaging period incorporated in the McDonald's Pricing
9
AB Volvo (avail. May 16, 1997).
TXU Corporation (avail. Sept. 13, 2004). See also. e.g., Epicor Software Corp. (avail. May 13, 2004)
(permitting Epicor to determine the magnitude of an offer price adjustment by reference to the average closing
price per share of Epicor common stock during the ten trading-day period ending two trading days before
expiration of the offer); BBVA Privanza International (Gibraltar) Limited (avail. Dec. 23, 2005) (permitting
BBVA Gibraltar to price a tender offer for preference shares based on a stated fixed spread over yield on a
specified benchmark U.S. Treasury security on the second business day immediately preceding the expiration
of the tender offer period).
10
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Mechanism. The underlying policy favoring a longer pricing period is in principle that it
protects investors against potential manipulation and other unusual price movements
that could distort the value of consideration offered to investors. A lengthy averaging
period, however, increases the likelihood that market-wide fluctuations may influence the
calculation and that the prices of the underlying securities at the end of the averaging
period differ significantly from the value ascribed to them by the Pricing Mechanism-a
result that could particularly adversely affect less sophisticated investors who decide
whether to participate in an exchange offer based on the final values of the stocks
involved. The Pricing Mechanism uses more current pricing through a shorter averaging
period, while still providing protection against the manipulation that could arise using
"point in time" pricing, and thus should benefit investors as a whole.
The Pricing Mechanism also offers significant advantages to investors in that it:
•
minimizes the potential for pricing disparities between the announced ratio
and the final ratio as occurs in offers using fixed exchange ratios;
•
is simple to understand, because it focuses on the relative value relationship
between two stocks (the central consideration for investors);
•
relies on more current information about the value of the stocks in question,
because it uses a shorter averaging period, while at the same time
incorporating protections against manipulation; and
•
announces the final exchange ratio by 9:00 a.m., New York City time, on the
second trading day immediately preceding the expiration date, allowing
investors two full trading days to evaluate the Exchange Offer and decide
whether to tender or withdraw their shares.
Practical experience also suggests that smaller investors have participated
effectively in offers using market-based pricing and that they would readily understand
the simpler and more intuitive pricing mechanism used in the Exchange Offer. While
they arose in an employee compensation context, the issuer tender offers conducted by
Comcast and Microsoft, 11 among others, demonstrate that tens of thousands of
individual investors-some with no remaining connection to the issuer-were able to
evaluate market-based offers where the exchange ratio was not fixed at the start of the
It is noteworthy that neither employees nor former employees can be
offer.
distinguished from other security holders in either their need for adequate and timely
pricing information or their ability to analyze and act on market-based pricing. We also
note that the Similar Exchange Offers were well oversubscribed. For example, the
11
See, e.g., Comcast Corp. (avail. Oct. 7, 2004) (permitting transfers of options, more than 85% of
which were "out-of-the-money," to a broker as part of an employee compensation mechanism, where the
exact compensation to be paid to employees in respect of those options was determined after expiration of
the transfer period); Microsoft Corp. (avail. Oct. 15, 2003) (similar option transfer program where all of the
eligible options were "out-of-the-money").
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Weyerhaueser-Tri Pointe Exchange Offer was approximately 3.5-times oversubscribed
(58,813, 151 shares accepted for exchange out of 205, 186,689 shares validly tendered),
the CBS Exchange Offer was approximately 7-times oversubscribed (44,723, 131 shares
accepted for exchange out of 300,229, 143 validly tendered), the Pfizer Exchange Offer
was approximately 4-times oversubscribed (405, 117, 195 shares accepted for exchange
out of 1,674,974,996 validly tendered), the PPG Exchange Offer was approximately 7times oversubscribed (10,825,227 shares accepted for exchange out of 68,933,881
shares validly tendered), the BMS Exchange Offer was approximately 2-times
oversubscribed (269,285,601 shares accepted for exchange out of 499,484,935 shares
validly tendered), the Kraft Exchange Offer was approximately 12-times oversubscribed
(46, 119,899 shares accepted for exchange out of 568,543,287 validly tendered), the
P&G Exchange Offer was approximately 12.5-times oversubscribed (38,652,878 shares
accepted for exchange out of 484, 121,230 shares validly tendered), the WeyerhaeuserDomtar Exchange Offer was approximately 4.5-times oversubscribed (25,490, 196
shares accepted for exchange out of 114,204,244 shares validly tendered) and the
McDonald's Exchange Offer was approximately 14-times oversubscribed (18,628, 187
shares accepted for exchange out of 262, 183,800 shares validly tendered).
The Pricing Mechanism is also consistent with the relief granted in Lazard and its
progeny in all other material respects: (i) the value relationship between the securities
involved is fixed and remains constant during the Exchange Offer (subject to the limit on
the exchange ratio described above), such that holders will be able to determine the
value they will receive in consideration for tendering their shares; (ii) the final exchange
ratio is based on readily observable average trading prices for securities listed on
national securities exchanges over a specified period; (iii) Lockheed Martin will issue a
press release announcing the final exchange ratio by 9:00 a.m. on the second trading
day immediately preceding the expiration date and will file an amendment to its
Schedule TO on the same day setting forth the final exchange ratio and including the
press release as an exhibit, thus allowing investors two full trading days to consider the
final exchange ratio and decide to tender or withdraw; and (iv) holders of shares of
Lockheed Martin common stock can also contact Lockheed Martin's information agent
at a toll-free number disclosed in the Prospectus to obtain indicative exchange ratios
prior to the announcement of the final exchange ratio once it has been publicly
announced.
C. Other Precedent
The Staff also has an established interpretation of its issuer tender offer pricing
rules to permit modified Dutch auction tender offers, subject to certain conditions, which
allow the bidder to determine the ultimate tender offer purchase price after the offer has
expired. We believe that the Pricing Mechanism is consistent with the Staff's position on
Dutch auction tender offers and, in fact, provides certain advantages to investors. Like
modified Dutch auction offers, (i) the Exchange Offer will provide for pro rata acceptance
throughout the offer with all securities participating equally in prorating; (ii) withdrawal
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rights will exist throughout the offer period; (iii) there will be prompt announcement of the
final exchange ratio; and (iv) the bidder will exchange all accepted securities at the
highest consideration paid to any security holder under the offer. 12 Unlike the Pricing
Mechanism, however, Dutch auction pricing provides significantly less visibility to
investors about the value they will receive, since it merely establishes a range of prices
at the outset without providing any visibility during the offer as to likely outcomes and
requires tendering stockholder to try to "predict" the ultimate purchase price.
D. Similarities and Differences from Precedent
1. Final Exchange Ratio Timing and Disclosure
The Pricing Mechanism is consistent with the Baxter, GE, BMS, Procter &
Gamble, TXU and Lazard offers but differs from the pricing mechanisms used in the
Weyerhaeuser-Tri Pointe, CBS, Pfizer, PPG, Kraft, Halliburton, Weyerhaeuser-Domtar
and McDonald's Exchange Offers, with respect to the following points:
•
Whereas in the Weyerhaeuser-Tri Pointe, CBS, Pfizer, PPG, Kraft,
Halliburton, Weyerhaeuser-Domtar and McDonald's Exchange Offers, the
per-share values of stocks into which the securities were exchangeable were
determined by reference to the daily VWAP of each such stock during an
averaging period ending on and including the expiration date of the exchange
offer, the Averaging Period will end on and include the third trading day
preceding the expiration date, allowing investors two full trading days to
consider the final exchange ratio in the Exchange Offer and decide to tender
or withdraw at any time during that two-day period.
•
The Exchange Offer to be commenced by Lockheed Martin will rely on
traditional, timely methods of disclosure of the final pricing and exchange
ratio described herein consistent with the "Day 18" pricing mechanisms used
in the Baxter, GE, BMS, Procter & Gamble, TXU and Lazard offers. The
special internet-based information concerning daily trading prices during the
Averaging Period that was required in the Weyerhaeuser-Tri Pointe, CBS,
Pfizer, PPG, Kraft, Halliburton, Weyerhaeuser-Domtar and McDonald's
Exchange Offers will be provided once a day between 4:11 p.m. and 4:30
p.m., New York City time, on a website that will be maintained at
www.edocumentview.com/LockheedMartinExchange.
2. Proxy Pricing
There is currently no trading market for Splitco common stock and no such
trading market will be established in the future. Lockheed Martin believes, however, that
the trading prices for Leidos common stock are an appropriate proxy for the price of
12
SEC Rel. No. 33-6653 (July 11, 1986).
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Splitco common stock because (i) prior to the Distribution, Splitco will issue to Lockheed
Martin a number of shares of Splitco common stock such that the total number of shares
of Splitco common stock outstanding immediately prior to the Merger will be 76,958,918;
(ii) in the Merger, each share of Splitco common stock will be converted into the right to
receive one share of Leidos common stock; and (iii) at the Valuation Dates, it is
expected that all the major conditions to the consummation of the Merger other than
those that will be consummated on or immediately prior to the Closing Date (e.g., the
Distribution) will have been satisfied and the Merger will be expected to be
consummated shortly thereafter, such that investors should be expected to be valuing
Splitco common stock based on the expected value of Leidos common stock after the
Merger without the entitlement to the Leidos Special Dividend. There can be no
assurance, however, that Leidos common stock after the Merger will trade on the same
basis as Leidos common stock trades prior to the Merger.
3. Averaging Period
The Pricing Mechanism is consistent with Baxter, GE, BMS, Procter & Gamble,
Weyerhaeuser-Tri Pointe, CBS, Pfizer, PPG, Kraft, Halliburton and WeyerhaeuserDomtar Pricing Mechanisms in that the exchange ratio of the Exchange Offer is based
on a three-day averaging period, while in the McDonald's Exchange Offer the exchange
ratio was based on a two-day averaging period and in the TXU and Lazard Offers the
exchange ratio was based on a ten-day averaging period.
IV.
REQUESTED RELIEF
Based on the foregoing, we respectfully request on behalf of Lockheed Martin
that the Staff confirm that it will not recommend that the Commission take enforcement
action pursuant to Rules 13e-4(d)(1), 13e-4(e)(3), 13e-4(f)(1)(ii) and 14e-1(b) under the
Exchange Act (requiring the specification of consideration offered and the extension of
the offer on a change in consideration) with respect to Lockheed Martin's use of the
Pricing Mechanism as described in this letter. We note that the relief sought is
consistent with the position previously taken by the Staff in the Baxter, GE, BMS and
Procter & Gamble Exchange Offers. It is also consistent with the position previously
taken by the Staff in the Weyerhaeuser-Tri Pointe, CBS, Pfizer, PPG, Kraft, Halliburton,
Weyerhaeuser-Domtar and McDonald's Exchange Offers, and to the extent that the
Exchange Offer differs from the Weyerhaeuser-Tri Pointe, CBS, Pfizer, PPG, Kraft,
Halliburton, Weyerhaeuser-Domtar and McDonald's Exchange Offers, such differences
are consistent with the position previously taken by the Staff in Baxter, GE, BMS,
Procter & Gamble, TXU and Lazard and do not affect the adequate dissemination of
pricing related information or Lockheed Martin's stockholders' ability to make informed
investment decisions with respect to whether or not to participate in the Exchange
Offer.
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We respectfully request that the Commission issue the requested relief as soon
as practicable.
If you have any questions or comments with respect to this matter, please call me
at (410) 659-2709.
Sincerely,
~c.~
Glenn C. Campbell
cc:
Stephen M. Piper, Lockheed Martin Corporation
Marian S. Block, Lockheed Martin Corporation
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.