BioAmber Inc fka BIOAQ

[101King_Kong101]

Creating a Canadian holding corp is the first step to preserving 237M in NOLs:

https://www.lexology.com/library/detail.aspx?g=96da1cd1-b148-42a3-9639-d2f988d2c238

When a private equity group acquires a loss corporation, these issues can be difficult to resolve in a manner that provides all parties with a level of confidence that can be relied upon for both financial statement and tax return position purposes as to what the limitation may be on the NOLs as a result of this change or prior changes. For example, assume that a loss corporation (LossCo) was formed 10 years ago. Upon its formation it had three shareholders. Over the next five to six years LossCo issued various rounds of preferred stock, bringing in new cash and new investors each time. In year seven LossCo did an IPO and became a public company and converted all the series preferred stock to common. Then, in year 10, PE (a private equity group) proposes to "take LossCo private." In a typical private equity going private transaction, private equity funds advised by the PE firm will contribute cash in exchange for stock to a newly formed "holding company." The new holding company may also borrow cash from an unrelated lender. In addition, this type of transaction often involves a partial rollover of certain key shareholders through the issuance of new common stock of the new holding company, usually to certain key managers or shareholders of LossCo, in exchange for the contribution of their LossCo shares to the new holding company. The transaction may involve the issuance of new preferred stock and possibly convertible debt, or just straight debt. The holding company’s new cash is used to buy the stock of LossCo from the public and other selling shareholders in a tender offer. The remaining shareholders that did not sell their shares in the tender offer are generally "squeezed out" in a reverse cash merger whereby the new holding company causes a newly formed transitory acquisition subsidiary to merge with and into LossCo, with LossCo surviving.

https://home.kpmg.com/content/dam/kpmg/pdf/2014/05/canada-2014.pdf

Comparison of asset and share purchases
Advantages of asset purchases
• a portion of the purchase price can be depreciated or amortized for tax purposes.
• a step-up in the tax basis of assets for capital gains purposes and depreciation purposes is obtained.
• a deduction is gained for inventory purchased at higher than book value.
• no previous liabilities of the company, either contingent or actual, are assumed.
• Possible to acquire only part of a business.
• Flexibility in financing options.
• Profitable operations can be absorbed by loss companies in the acquirer’s group, provided certain planning is undertaken, gaining the ability to use the losses.


Disadvantages of asset purchases
• Possible need to renegotiate supply, employment and technology agreements.
• an asset sale may be less attractive to the vendor, thereby increasing the purchase price.
• transfer taxes on real property, GSt/HSt and PSt on assets may be payable.
• Benefit of any losses incurred by the target company remains with vendor.

Advantages of share purchases
• Usually more attractive to the vendor, so the price may be lower.
• Purchaser may benefit from tax losses of the target company.
• Purchaser may gain the benefit of existing supply and technology contracts.
• Purchaser does not have to pay transfer taxes on shares acquired.


Disadvantages of share purchases
• Purchaser acquires unrealized tax liability for depreciation recovery on the difference between original cost and tax book value of assets.
• Purchaser is liable for all contingent and actual liabilities of the target company.
• no deduction for the excess of purchase price over tax value of assets.