10.4 Mergers and Divisions 377was profit, while Nomura took about £330 million, of which about £140 million
was profit. WestLB’s fees were about £20 million.
The story did not end there. WestLB’s credit exposure was now £860 million. The parties
intended to restructure Boxclever’s loans and shift the loan off WestLB’s balance sheet.
The balance of the original £860m loan was converted into mezzanine debt. A £748 million
securitisation followed. Boxclever issued notes secured against the income from
Boxclever’s TV rental business. However, WestLB was unable to sell the notes to other
investors and had to hold £528 million of the note issue on its own balance sheet. Even
worse, it turned out that Boxclever could not service its heavy debts. In 2003, Boxclever
defaulted. Later, it went bankrupt. In 2005, an acquisition vehicle established by Fortress
and Cerberus (and their related funds) acquired the outstanding notes and other assets for
£200 million in a complex transaction. WestLB lost about €430 million in write-offs. The
transaction led to criminal charges in Germany (Untreue). In addition, a French bank sued
CIBC and WestLB which had acted as co-lead managers in the securitisation transaction for
breach of duty of care.
10.4.3 Formation of a Holding SE
The SE Regulation is flexible in that it enables companies from different Member
States to merge, to create a holding company, or to form joint subsidiaries. Forma-
tion of a holding SE is one of the four ways to establish an SE under the SE Regu-
lation.^225 It can sometimes be an economic equivalent to a merger.
Continued existence of participating companies. Unlike in a merger, the com-
panies that participate in the formation of a holding SE will not cease to exist but
become subsidiaries of the holding SE.^226 This also explains why a Member State
may not oppose the formation of a holding SE on grounds of public interest al-
though it may oppose the formation of an SE by merger.^227
Friendly transaction. Like a merger, the formation of a holding SE is always
friendly. The holding SE will not be formed, unless draft terms are first drawn up
by the management or administrative organs of the participating companies.^228 A
written report must be drawn up by independent experts for their shareholders.^229
The general meeting of each company promoting the operation will have a veto
right.^230
Consideration. Shareholders who have contributed their securities to the forma-
tion of the SE will receive shares in the holding SE.^231
Valuation. The main rule on valuation is a disclosure rule. Draft terms for the
formation of the holding SE must include “a report explaining and justifying the
(^225) Recital 10 and Articles 2(2) and 32 of Regulation 2157/2001 (SE Regulation).
(^226) Article 32(1) of Regulation 2157/2001 (SE Regulation). For companies that may par-
ticipate, see Article 2(2) and Annex II of Regulation 2157/2001 (SE Regulation).
(^227) Article 19 of Regulation 2157/2001 (SE Regulation).
(^228) Article 32(2) of Regulation 2157/2001 (SE Regulation).
(^229) Article 32(4) of Regulation 2157/2001 (SE Regulation).
(^230) Article 32(6) of Regulation 2157/2001 (SE Regulation).
(^231) Article 33(4) of Regulation 2157/2001 (SE Regulation).