Foster City, Calif.-based buyout firm Fox Paine & Co. last week signed a letter of intent with Arthur Andersen LLP to buy its tax unit. A spokesperson for Fox Paine confirmed the story but declined any further comment. According to a story in the Wall Street Journal, the firm will purchase the tax group for between $800 million and $900 million.
The deal offer from Fox Paine reportedly set back a tentative agreement between accounting firm Deloitte & Touche LLP and Arthur Andersen, where the former would buy a segment of the latter’s tax group. The advantage may fall on the side of Fox Paine, as a leveraged buyout will allow management to continue running the group rather than having its members dispersed through Deloitte’s operations.
Arthur Andersen has been seeking buyers for its business units in order to salvage what they can from the failing firm as it prepares to face the criminal indictment spurred by the collapse of Enron Corp. As a result of the firm’s indictment, bad publicity and subsequent financial difficulties, Andersen has already made plans to lay off approximately 7,000 employees from the chopping block. By selling off business units prior to the May criminal trial, the accounting firm may be able to save some of its workers. The deal offered by Deloitte & Touche may have rescued 500 of the firm’s 1,750 partners, according to a report in Business Week. Presumably, the Fox Paine offer would up that number since it includes the entire tax unit.
Fox Paine typically invests in middle market companies in a wide range of industries. And the firm has no qualms about confronting difficult situations. In an interview in May 2000, chief executive Saul Fox told Buyouts that it’s the smaller “complicated situations” that appeal to Fox Paine – transactions where the deal, the company or the financibility is difficult to orchestrate.
Most recently Fox Paine set up Cradle Holdings, a platform for cosmetic industry companies. The platform has already acquired skincare company Erno Laszlo and fragrance-maker Penhaligon.
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