Pedernales, a cash rich Texas company that produces petrochemicals, would like to expand its operations in the Southwest It considers acquiring Dorado, a Nevada corporation that disposes chemical wastes Dorado owns key licenses, facilities, and technological processes Over the years, it has accumul...

Pedernales might structure an acquisition as either a taxable stock purchase or a reverse triangular ...

Pedernales, a cash-rich Texas company that produces petrochemicals, would like to expand its operations in the Southwest.

Question:

Pedernales, a cash-rich Texas company that produces petrochemicals, would like to expand its operations in the Southwest. It considers acquiring Dorado, a Nevada that disposes chemical wastes. Dorado owns key licenses, facilities, and technological processes. Over the years, it has accumulated substantial business and foreign tax credits. Because waste disposal sites are scarce in the United States, the value of Dorado’s assets has increased threefold, while the value of Dorado stock has increased fivefold. The Rodriguez family, which owns a 52% equity stake in Pedernales, wants to retain control of the Texas Company. How might Pedernales structure an acquisition? What tax and other issues should it consider?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...