corresp
TAFT STETTINIUS & HOLLISTER LLP
One Indiana Square, Suite 3500
Indianapolis, Indiana 46204
Telephone: (317) 713-3500
Fax: (317) 713-3699
February 8, 2011
Pamela Long, Assistant Director
Office of Mergers & Acquisition
U.S. Securities and Exchange Commission
100 F Street, NE
Mail Stop 3628
Washington, D.C. 20549
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Re: |
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All American Group, Inc.
Amendment No. 1 to Schedule 13E-3
Filed December 17, 2010
File No. 005-19485
Amendment No. 1 to Registration Statement on Form S-4
Filed December 17, 2010
File No. 333-171241 |
Dear Ms. Long:
On behalf of All American Group, Inc. (the Company), this letter is in response to the
comments of the Staff (the Staff) of the U.S. Securities and Exchange Commission (the SEC) with
respect to the above-referenced filings provided in your letter dated February 7, 2011 (the
Comment Letter). Our responses are in bold text following the text of each comment.
Schedule 13E-3
Item 3. Identity and Background of Filing Persons, page 3
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1. |
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We reissue prior comment four as it related to Item 11 of your Schedule 13E-3. |
To the extent not already included in footnote 1 to the table on page 78 of the S-4, we have
added the information from Item 11 in two new paragraphs appearing on page 79.
Form S-4
General
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2. |
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We note your response to prior comment nine. Your disclosure on page 54 discusses
those directors and officers who are presently serving as directors or officers of
your company. Item 18(a)(7) of Form S-4 requires disclosure of each person who will serve
as an executive officer or director of the surviving company. In this regard, we note your
disclosures in the third paragraph on page two and in the first two paragraphs on page 40
in which you state that only certain |
Pamela Long, Assistant Director
February 8, 2011
Page 2
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officers and directors will continue serving in those capacities following the effective
time of the merger. Please revise your disclosure on page 54 to clearly identify those
individuals who will serve as executive officers and directors of the surviving company. |
We have specified on page 54 that Mr. Sanford and Mr. de Armas will be the directors of AAG
after the Merger. On page 56, we have indicated that Mr. de Armas, Mr. Lavers and Ms. Zuhl will
be the executive officers of AAG after the Merger.
Introduction
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3. |
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As requested in prior comment 11, please highlight that holders of the trust units
may not receive any cash payment from liquidating trust. Also, disclose here and in the
corresponding section on page 60 how the Schedule 13E-3 filing persons would benefit from
a sale of the Specialty Vehicles business after the time period required or for a price
not meeting the threshold required for the Trust to receive any proceeds from the sale.
Please also clarify whether the surviving corporation has any obligation or current
intention to use commercially reasonable efforts to actively seek out a transaction
meeting the sale price requirements. We note that Section 5.13(b) of the Merger Agreement
requires the company to use commercially reasonable efforts to sell the business prior to
the Outside Sale Date. |
We have highlighted the paragraph of the introduction that specifies that the holders of trust
units may not receive any cash payment from the liquidating trust. We have added the requested
additional information in the Introduction and on page 60.
Special Factors, page 17
Background, page 17
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4. |
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We note your response to prior comment 19. Please provide us your legal analysis as
to whether the previously-referenced liquidation analysis falls within the description of
reports subject to disclosure under Item 1015 of Regulation M-A. |
Item 1015 of Regulation M-A requires disclosure with respect to any report, opinion or appraisal
of an outside party that is materially related to the Rule 13e-3 transaction. The referenced
liquidation analysis was not performed in connection with the Merger. Rather, the financial
adviser was engaged to perform the analysis before H.I.G. proposed the Merger. The Board engaged
the adviser to assist it in considering whether a liquidation in bankruptcy would be of benefit
to AAGs shareholders, and the adviser did not address the fairness of the Merger Consideration
and the Merger. The advisers analysis was delivered after the Merger was proposed by H.I.G.
Given the passage of nearly two months from the delivery of the advisers analysis to the
approval and AAGs worsening liquidity crisis over that time, the Special Committee and the
Board did not consider that analysis to be reliable in considering its decisions with respect to
the Merger. Instead, the Special Committee and the Board relied on managements liquidation
analysis prepared immediately before their decisions were made. Given that the analysis was not
performed in connection with the Merger and that the Special Committee and the Board relied on
the later management analysis, AAG and its counsel concluded that the advisers analysis is not
material and not subject to disclosure under Item 1015 of Regulation M-A.
Pamela Long, Assistant Director
February 8, 2011
Page 3
Fairness of the Merger, page 26
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5. |
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We note the revisions made in response to prior comment 28. Please revise
the fifth bullet point in this section to more specifically quantify the expenses of
remaining a reporting entity. |
We have revised the bullet point on page 26 to give details of the estimated annual
expenses of remaining a public company.
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6. |
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We note your response to prior comment 29 and we reissue it. Our comment
addressed the financial analyses conducted by Houlihan Lokey and not solely the
liquidation analysis that underlied a portion of Houlihan Lokeys analyses. |
We have added language on page 28 to reflect the Special Committees and the Boards adoption
of Houlihan Lokeys conclusion set forth in its opinion.
Opinion
of Houlihan Lokey Financial Advisors, Inc., page 32
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We note your response to prior comment eight and this new disclosure section. It
is unclear how the disclosure complies with Item 1015(b) of Regulation M-A. We disagree
with the second paragraph of your response to prior comment 8: whether the special
committee relied on a particular analysis in evaluating the transaction is not the
determining factor under Item 1015(b)(6) of Regulation M-A. |
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We believe the disclosure in the proxy statement relating to Houlihan Lokeys opinion and
related presentation, dated November 8, 2010, to the Companys Special Committee complies
with Item 1015(b) of Regulation M-A and note for the Staff the following: |
With respect to Item 1015(b)(1) (identify the outside party), we draw
the Staffs attention to the reference on page 32 of the proxy statement that the
Special Committee retained Houlihan Lokey to render an opinion as to the fairness,
from a financial point of view and as of the date of the opinion, of the Merger
Consideration.
With respect to Item 1015(b)(2) (briefly describe the qualifications of
the outside party), we note for the Staff the description on pages 18 and 36 of
the proxy statement that Houlihan Lokey is regularly engaged to provide advisory
services in connection with mergers and acquisitions, financings and financial
restructuring.
With respect to Item 1015(b)(3) (described the method of selection of
the outside party), in addition to the qualifications noted above, we note for the
Staff the description on pages 18 and 36 of the proxy statement that the Special
Committee selected Houlihan Lokey to render an opinion based on Houlihan Lokeys
reputation and experience.
With respect to Item 1015(b)(4) (describe any material relationship
that existed during the past two years or is mutually understood to be contemplated
and any compensation received or to be received as a result of the relationship
Pamela Long, Assistant Director
February 8, 2011
Page 4
between the outside party, its affiliates and the subject company or its
affiliates), we supplementally note for the Staff the disclosure on pages 36 and 37
of the proxy statement relating to investment banking, financial advisory and other
financial services provided by Houlihan Lokey and certain of its affiliates in the
past or currently contemplated, for which Houlihan Lokey and such affiliates have
received or may receive compensation, including, among other things, having provided
or currently providing certain valuation advisory services to AAG and/or H.I.G.
Capital and certain of its affiliates and portfolio companies. In light of the
Staffs comment and comment #9, we supplementally advise the Staff that, except
in connection with the merger, no fees were paid by the Company
to Houlihan Lokey during the two-year period
prior to the date of Houlihan Lokeys opinion and we have
added further disclosure quantifying the fees received by Houlihan Lokey from H.I.G.
Capital during such two-year period.
With respect to Item 1015(b)(5) (if the report, opinion or appraisal
relates to the fairness of the consideration, state whether the subject company or
affiliate determined the amount of consideration to be paid or whether the outside
party recommended the amount of consideration to be paid), we note for the Staff the
disclosure on page 36 stating that Houlihan Lokey was not requested to, and it did
not, recommend the specific consideration payable in the merger and that the type
and amount of the consideration payable in the merger was determined through
negotiation between the Special Committee and Acquiror.
With respect to Item 1015(b)(6) (furnish a summary of procedures
followed, findings and recommendations, bases for and methods of arriving at such
findings and recommendations, instructions received from the subject company or
affiliate and any limitation imposed by the subject company or affiliate on the
scope of the investigation), we refer the Staff to the disclosure on pages 32
through 37 of the proxy statement and, in particular, we note for the Staff, among
other things:
(i) the bulleted summary on page 33 of the proxy statement of the
information reviewed and inquiries made by Houlihan Lokey (or the
procedures followed) in arriving at its opinion;
(ii) the opinion (or the findings) of Houlihan Lokey set forth on
page 32 of the proxy statement that the Merger Consideration to be received
by holders of the Common Shares (other than excluded holders) was fair, from
a financial point of view, to such holders;
(iii) the bolded text on page 32 of the proxy statement that Houlihan
Lokeys opinion was not intended to be, and does not constitute, a
recommendation to the Special Committee, AAGs board of directors, any
security holder or any other person as to how to act or vote with respect to
any matter relating to the merger (or the recommendations);
(iv) the full paragraphs on pages 33 and 34 stating the factors and
information relied upon (or the bases for and methods of arriving at such
findings) by Houlihan Lokey in connection with its opinion, including
Pamela Long, Assistant Director
February 8, 2011
Page 5
the deteriorating financial condition of the Company described to
Houlihan Lokey by the Companys management, the information and projections
relating to the Company provided to Houlihan Lokey and the fact that
Houlihan Lokey did not perform any financial analysis of the Company,
whether relative to other companies or transactions in relevant industries,
based on the discounted cash flows of the Company or otherwise, and relied
upon the liquidation analysis performed by the Companys management for
purposes of Houlihan Lokeys opinion. This liquidation analysis is already
summarized on page 37 of the proxy statement;
(v) the full paragraphs on pages 33 and 34 stating the assumptions made
by Houlihan Lokey based upon the advice (or instructions) of the Companys
management with respect to, among other things, the Companys financial condition, financial
forecasts relating to the Company and the liquidation analysis prepared by
the Companys management;
(vi) in addition to the limiting factors noted in clause (iv) above and
as set forth in Houlihan Lokeys opinion, the disclaimers disclosed on pages
34 and 35 to the extent considered limitations, including that Houlihan
Lokey was not requested to and did not make any physical inspection or
independent appraisal or evaluation of any of the assets, properties or
liabilities (fixed, contingent, derivative, off-balance sheet or otherwise)
of the Company or any other person, did not initiate or participate in any
discussions or negotiations with, or solicit any indications of interest
from, third parties with respect to the merger, negotiate the terms of the
merger or advise the Special Committee, AAG or any other party as to any
alternatives to the merger. We further note the disclosure appearing on
page 35 of the proxy statement which states that, except as described in the
summary, the Special Committee imposed no other instructions or limitations
on Houlihan Lokey with respect to the investigations made or procedures
followed by it in rendering its opinion.
As noted above in clause (iv), Houlihan Lokey relied for purposes of its opinion on the
liquidation analysis of the Company prepared by the Companys management and did not separately
conduct other financial analyses of the Company. We note for the Staff that such
liquidation analysis as well as the financial projections relating to the Company
prepared by the Companys management and contained in Houlihan Lokeys presentation already have
been summarized on pages 37 and 23, respectively, of the proxy
statement. Other
financial information relating to the Company contained in Houlihan Lokeys
presentations provided to the Special Committee
at its November 8, 2010 meeting were implied
enterprise values and revenue multiples based on the Merger Consideration and implied premiums based on certain
historical trading information relating to the Companys common stock. In light of the Staffs
comment, we have added disclosure on page 25 of the Background section to describe further such
additional financial information.
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We reissue prior comment 31. Our comment was not intended to be limited to a situation
where the special committee relied solely on the financial advisors opinion. |
Pamela Long, Assistant Director
February 8, 2011
Page 6
AAGs independent directors and
executive officers (other than those directors and executive officers
that retain or obtain, directly or indirectly, an equity interest
in AAG or Acquiror following consummation of the merger) are not
excluded holders for purposes of
Houlihan Lokeys opinion. However, they may be considered affiliates of AAG. The Special
Committee and the Board considered the interests of its independent
directors and such executive
officers in the Merger and concluded that those interests did not materially affect the fairness
of the Merger to the unaffiliated shareholders. We have added language in the last bullet point
on page 26 to disclose the additional factors considered by the Special Committee and the Board
in determining that the Merger is fair to the unaffiliated shareholders, notwithstanding that
the Companys directors (other than Mr. Sanford and Mr. de
Armas) and such executive officers are not
excluded holders.
Miscellaneous, page 36
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9. |
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Please quantify any and all fees Houlihan Lokey (or any of its affiliates) has
received or will receive from the subject company and any of its affiliates, as required
by Item 1015(b)(4) of Regulation M-A. Also, clarify in your disclosure whether Houlihan
Lokey (or any of its affiliates) has committed to invest with H.I.G. Capital (or any
affiliate) with respect to the current transaction. |
Please see our response to comment #7 above. We have added language at page 37 disclosing that
Houlihan Lokey has not committed to invest with H.I.G. Capital or its affiliates in the Merger.
Federal income tax consequences of the Merger to the Company...page 43
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We note your response to comment 37 in our letter dated January 13, 2011. Please
revise to discuss the tax consequences of the transaction for each filing person. For
example, we note that you have not discussed the tax consequences with respect to Sami W.
Mnaymneh, Anthony A. Tamer, Matthew Sanford, and Fabian Armas. |
We have added language beginning at the bottom of page 43 disclosing the referenced information.
Summary Financial Data page 75
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11. |
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We note your response to comment 40. Please revise the presentation of your
financial statements to disclose the ratio of earnings to fixed charges. See Item 1010(a)(3)
of Regulation M-A. Be advised that although we understand that Item 503(d) of Regulation S-K
refers to registered debt securities or preference equity securities, the ratio of earnings
to fixed charges required by Item 1010(c)(4) is not limited to circumstances in which a
company has registered debt securities and/or preference equity securities. Rather, Item
1010(a)(3) of Regulation M-A requires that the company present its ratio of earnings to
fixed charges in a manner consistent with Item 503(d) of Regulation S-K. The fixed charges
referred to by the item requirement are not limited to those associated with registered debt
or preference equity securities and should be presented in all circumstances in which the
company has any fixed charges. |
We have added the ratio of earnings to fixed charges in the first table on page 76.
Pamela Long, Assistant Director
February 8, 2011
Page 7
* * * * * * * * * * * * * *
If you have any questions, please call me at 317-713-3468.
Very truly yours,
/s/ Philip L. McCool
Philip L. McCool