Supercharged IPO

Transaction Structure

Step 1	Description
	Seller owns subsidiary which it seeks to montetize through "supercharged IPO"
Step 2	Description
	Seller contributes subsidiary to NewCo and enters into "binding committment" with underwriters to sell > 20% of NewCo common equity in a marketed public offering Seller commits to reduce its NewCo position to < 50% within a 2-year period and ultimately fully exits NewCo NewCo and Seller enter into tax-sharing arrangements whereby NewCo makes annual cash payments to Seller equal to 80-90% of cash tax savings of Section 338 step-up * Seller must also receive a small amount of cash from NewCo to ensure tax step-up

Advantages	Disadvantages
Seller recoups substantial portion of tax cost of asset sale through annual tax-sharing payments made by NewCo NewCo obtains 100% tax step-up Tax-sharing obligation may not impair NewCo's IPO valuation and does not affect EPS (booked as a liability at closing) Seller monetizes 100% of value if Subsidiary through periodic secondary sell-down	Seller triggers 100% of tax gain immediately, notwithstanding that it may have only sold a smaller percentage of NewCo in the IPO