SEC no-action letter regarding Rule 14e-5 relief for AFB Investment S.A. tender offer for Forbo Holding AG

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March 17, 2005

Sarah Murphy, Esq. Freshfields Bruckhaus Deringer 65 Fleet Street London EC4V 1HS England

Re:

Cash Tender Offer by AFB Investment S.A. for Forbo Holding AG Request for 14e-5 Relief TP No: 05-40

Dear Ms. Murphy:

This is in response to your letter dated March 17, 2005. A copy of that letter is attached with this response. By including a copy of your correspondence, we avoid having to repeat or summarize the facts you presented. The defined terms in this letter have the same meaning as in your letter, unless otherwise noted.

The United States Securities and Exchange Commission (Commission) hereby grants an exemption from Rule 14e-5 under the Securities Exchange Act of 1934 (Exchange Act) on the basis of your representations and the facts presented, but without necessarily concurring in your analysis, particularly in light of the following facts:

The Offer is required to be conducted in accordance with the Federal Stock Exchange and Securities Trading Act (Bundesgesetz uber die Borsen und den Effektenhandel) and the Swiss Takeover Board's Ordinance on Public Tender Offers (Verordnung der Ubernahmekommission uber oofentliche Kaufangebote) and the rules of the SWX Swiss Exchange;

Forbo Holding AG (Forbo), a public company incorporated under the laws of Switzerland, is a "foreign private issuer," as defined in Rule 3b-4(c) under the Exchange Act; and

Any purchases of ordinary shares (Ordinary Shares) of Forbo by (i) CVC European Equity Partners III L.P. (CVC), a private equity fund organized as a limited partnership under the laws of the Cayman Islands; (ii) AFB Investment S.A. (AFB Investment), a corporation organized under the laws of Luxemborg formed for purposes of making the tender offer; or (iii) any broker or other financial institution acting as their agent, including any financial institution acting as financial advisor to CVC or AFB in connection with the Tender Offer (collectively, the Prospective Purchasers), will be subject to the Federal Stock Exchange and Securities Trading Act and the Swiss Takeover Board's Ordinance on Public Tender Offers;

The Commission grants this exemption from Rule 14e-5 under the Exchange Act to permit the Prospective Purchasers to purchase or arrange to purchase Ordinary Shares otherwise than pursuant to the Offer, subject to the following conditions:

No purchases or arrangements to purchase Ordinary Shares, otherwise than pursuant to the Offer, shall be made in the United States;

Disclosure of the possibility of such purchases by the Prospective Purchasers, otherwise than pursuant to the Tender Offer, will be included prominently in a supplementary announcement that will be disseminated through Bloomberg and Reuters in the same manner as the other English language Tender Offer materials prior to the purchase of any Ordinary Shares;

While Swiss law does not require the public disclosure of such purchases, the Prospective Purchasers shall disclose in the United States information regarding purchases of Ordinary Shares;

The Prospective Purchasers shall comply with any applicable requirements under Swiss law, including the Federal Stock Exchange and Securities Trading Act, the Swiss Takeover Board's Ordinance on Public Tender Offers and the rules of the SWX Swiss Exchange;

The Prospective Purchasers shall provide to the Division of Market Regulation (Division), upon request, a daily time-sequenced schedule of all purchases of Ordinary Shares made by any of them during the Offer, on a transaction-by-transaction basis, including:

size, broker (if any), time of execution, and price of purchase; and

if not executed on the SWX Swiss Exchange, the exchange, quotation system, or other facility through which the purchase occurred;

Upon the request of the Division, the Prospective Purchasers shall transmit the information as specified in paragraphs 5.a. and 5.b. to the Division at its offices in Washington, D.C. within 30 days of its request;

The Prospective Purchasers shall retain all documents and other information required to be maintained pursuant to this exemption for a period of not less than two years from the date of the termination of the Offer;

Representatives of the Prospective Purchasers shall be made available (in person at the offices of the Division in Washington, D.C. or by telephone) to respond to inquiries of the Division relating to their records; and

Except as otherwise exempted herein, the Prospective Purchasers shall comply with Rule 14e-5.

The foregoing exemption is based solely on your representations and the facts presented in your letter dated March 17, 2005, and is strictly limited to the application of the rules and statutory provisions listed above to your proposed transaction. Such transaction should be discontinued, pending presentation of the facts for our consideration, in the event that any material change occurs with respect to any of those facts or representations.

In addition, we direct your attention to the anti-fraud and anti-manipulation provisions of the federal securities laws, including Sections 10(b) and 14(e) of the Exchange Act and Rule 10b-5 thereunder. The participants in the Offer must comply with these and any other applicable provisions of the federal securities laws. The Divisions of Market Regulation expresses no view with respect to any other questions that the proposed transaction may raise, including, but not limited to, the adequacy of disclosure concerning, and the applicability of any other federal or state laws to, the proposed transaction.

For the Commission, by the Division of Market Regulation pursuant to delegated authority

James A. Brigagliano Assistant Director Office of Trading Practices & Processing

Incoming Letter:

Mr. James A. Brigagliano Division of Market Regulation Assistant Director Securities and Exchange Commission 450 Fifth Street, N.W. Washington D.C. 20549

17 March 2005

Ladies and Gentlemen

Re: Tender Offer by AFB Investment S.A. for Forbo Holding AG

We are writing on a confidential basis on behalf of our client, AFB Investment S.A. ( AFB Investment ), a corporation ( Soci�t� anonyme ) organized under the laws of Luxembourg, which was formed by CVC European Equity Partners III L.P. ( CVC ), a private equity fund organized as a Limited Partnership under the laws of the Cayman Islands, for the purpose of making a public tender offer (the Tender Offer ) for all publicly held registered shares (Namenaktien) of Forbo Holding AG ( Forbo ), a corporation governed by the provisions of the Swiss Code of Obligations ( schweizerisches Obligationsrecht ) with its registered seat in Eglisau, Switzerland.

AFB Investment announced on March 4, 2005 that it intended to proceed with the Tender Offer. The Tender Offer was subsequently made on March 8, 2005 in cash to the holders of all the issued and outstanding ordinary shares of CHF 20 each of Forbo (the Ordinary Shares ). Neither AFB Investment nor CVC nor any affiliates of CVC hold any Ordinary Shares, and no Ordinary Shares have been bought on their behalf since the date of the announcement.

As a condition to the Tender Offer, the general shareholders' meeting ( Generalversammlung ) of Forbo must resolve to amend the articles of incorporation ( Statuten ) of Forbo. Under the articles, AFB Investment may not vote proxies granted to it by shareholders of Forbo in the above meeting unless it owns at least one Ordinary Share. AFB Investment proposes to purchase at least one Ordinary Share in a transaction outside of the Tender Offer.

We, as U.S. counsel to AFB Investment in connection with the Tender Offer, are requesting exemptive relief from Rule 14e-5 ( Rule 14e-5 ) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act ), allowing the purchase of Ordinary Shares by AFB Investment.

BACKGROUND

Forbo

Forbo is a foreign private issuer as defined in Rule 3b-4(c) of the Exchange Act. The Ordinary Shares are not registered under Section 12 of the Exchange Act or listed on a U.S. national securities exchange or quoted on NASDAQ. Further, Forbo does not file reports with the Commission pursuant to Section 13(a) or 15(d) of, or Rule 12g3-2(b) under, the Exchange Act.

Forbo is a global producer of floor coverings, adhesives, and belts for power transmission, conveyor and processing applications. The company employs some 5,600 people worldwide and has an international network of 30 production companies and 45 sales organizations in 17 countries.

Forbo's paid-in share capital amounts to CHF 54,263,040, divided into 2,713,152 registered shares ( Namenaktien ) with a nominal value of CHF 20 each. Forbo's registered shares are listed on the SWX Swiss Exchange. Forbo has a conditional share capital of CHF 3,329,000 for the issuance of 166,450 registered shares with a nominal value of CHF 20 each.

For the year ended December 31, 2003, Forbo reported consolidated net sales of CHF 1598.9 million, compared with CHF 1531.1 million for the year ended December 31, 2002; consolidated profit before income tax of CHF 16.1 million, compared with CHF 42.6 million in 2002; and earnings per share of CHF 12.28 compared to earnings per share of CHF 32.65 in 2002. At December 31, 2003, Forbo had consolidated net assets of CHF 1563.8 million. Forbo had a market capitalization on December 31, 2003 of approximately CHF 464.8 million

Given the nature of shareholdings in Swiss companies and Swiss law, AFB Investment does not have access to specific information regarding Forbo's shareholdings or the addresses of its shareholders but based on public information, it believes that United States shareholders may beneficially own approximately 14% of the Ordinary Shares after excluding from the calculations shareholders owning more than 10% of the Ordinary Shares (one non-US holder owns 20%).

CVC

CVC and AFB Investment are foreign private issuers as defined in Rule 3b-4(c) of the Exchange Act. CVC is a private equity fund organized as a Limited Partnership under the laws of the Cayman Islands with its registered office in Grand Cayman. CVC is a leading independent private equity provider in Continental Europe and the UK, specializing in large scale leveraged buy-out transactions. Since 1981, CVC has completed more than 218 acquisitions with a total transaction value in excess of EUR 28 billion and currently has total funds under management of over USD 9 billion. CVC has 12 offices across Europe. Its Swiss office is located in Zurich.

BACKGROUND TO THE OFFER

After CVC had expressed its interest in a possible takeover of Forbo in early November of 2004, Forbo published a press release on November 11, 2004, announcing CVC's interest. On February 25, 2005, AFB Investment and Forbo entered into an agreement with respect to the Tender Offer. The Board of Directors of Forbo further decided to recommend the Tender Offer to shareholders of Forbo.

AFB Investment intends to effect a complete takeover of Forbo through the Tender Offer in order to delist Forbo from the stock market following the Tender Offer and to operate Forbo as a private company. AFB Investment is making the Tender Offer in its own name. However, after the Tender Offer has been settled, it intends to contribute the Forbo shares that are the subject of the Tender Offer to a corporation with registered seat in Switzerland, which AFB Investment will form and fully control.

TENDER OFFER STRUCTURE

The Tender Offer was made on March 8, 2005 in cash as a single offer made concurrently in Switzerland, the United States and certain other jurisdictions.

The Ordinary Shares will be acquired by AFB Investment fully paid and free from all liens, equities, charges, encumbrances and other third party rights or interests and together with all rights then or thereafter attaching thereto, including the right to all dividends and other distributions (if any) declared, made or paid thereafter.

The Tender Offer has been structured to comply with (i) the applicable rules and regulations of Swiss law, in particular the Federal Stock Exchange and Securities Trading Act ( Bundesgesetz �ber die B�rsen und den Effektenhandel ) (the Stock Exchange Act ) and the Swiss Takeover Board's Ordinance on Public Tender Offers ( Verordnung der �bernahmekommission �ber �ffentliche Kaufangebote ) (the TOO-TOB ) (such regulations and rules the Swiss Rules ) (which provide a comprehensive scheme for the regulation of Swiss tender offers) and (ii) Regulation 14E of the Exchange Act and the rules and regulations promulgated thereunder. CVC's primary objective in structuring the Tender Offer is to allow for participation by holders of the Ordinary Shares in Switzerland and the United States, while complying with the generally applicable requirements in those jurisdictions. The Tender Offer and the Tender Offer document dated March 8, 2005 comply with the Swiss Rules, as confirmed by the Swiss Takeover Board (the STOB ) in its recommendations dated March 7 and March 10, 2005 (under the Swiss Rules, the STOB reviews each public tender offer which is subject to the Swiss Rules and issues a reasoned decision as to the offer's compliance with the Swiss Rules in the form of a so called recommendation).

In compliance with the Swiss Rules, the Tender Offer has been, and all other notices and announcements relating to the Tender Offer will be, published in German in the Neue Z�rcher Zeitung and in French in l'Agefi . In addition, the Tender Offer document (in German, French and English) has been sent for publication to prominent electronic media that distribute stock market information and can be ordered free of charge from UBS Investment Bank, Transaction Legal, Opfikon, Switzerland.

In accordance with the Swiss Rules, the Tender Offer commenced on March 8, 2005, the day on which the offer document relating to the Tender Offer has been published. The Tender Offer will remain open until April 6, 2005, 4:00 p.m. (CET) (the Offer Period ). AFB Investment has reserved the right to extend the Offer Period once or several times. The Tender Offer will remain open for at least 10 trading days following the publication of any change in the offer price or of any change in any other material condition of the Tender Offer.

The Ordinary Shares are either held in book entry form or certificated form.

Under the Swiss Rules, a tender offer, once launched, is irrevocable, although a bidder is permitted to withdraw the offer if (i) another person or group publishes a competing offer to acquire the target company, or (ii) the conditions of the offer as provided for in the terms of the offer are not satisfied or waived by the offeror. In particular, an offer may be withdrawn if the minimum acceptance threshold provided for in the terms of the offer has not been reached at the expiration of the offer period. In the present case, the Tender Offer provides for a minimum acceptance level of 66.67% of all publicly held Ordinary Shares.

The Swiss Rules also regulate purchases of shares of a company which is the subject of an offer. In particular, the Swiss Rules require the offeror to notify the STOB and the stock exchange at which such shares are traded of any acquisition of such shares by noon CET on the first trading day following such acquisition (article 31(1) Stock Exchange Act; articles 37 et seq. TOO-TOB). Further, if the offeror acquires shares of the target company at a price exceeding the price it pays under the offer, it has to increase the price under the offer to the price it has paid for shares outside the offer (article 10(6) TOO-TOB).

PURCHASES OUTSIDE THE OFFER AND RULE 14E-5

Under the present articles of incorporation ( Statuten ) of Forbo, no person can exercise more than 8% of the voting rights of Forbo. AFB Investment has made it a condition to the Tender Offer that the articles of incorporation be amended (the Amendment ) to remove this 8% restriction. AFB Investment has asked tendering shareholders to grant it proxies for the purpose of voting their Ordinary Shares in favor of the Amendment at the general shareholders' meeting ( Generalversammlung ). However, AFB Investment may not vote these proxies unless it owns at least one Ordinary Share. Currently, neither AFB Investment nor CVC nor any affiliates of CVC hold any Forbo shares. In order to vote proxies at the general shareholders' meeting granted to it by Forbo shareholders (or exercise any other shareholder rights), AFB Investment must acquire at least one Ordinary Share in a transaction outside of the Tender Offer.

Under the Swiss Rules and in accordance with Swiss practice, AFB Investment may make purchases of the Ordinary Shares outside the Tender Offer on such terms as are agreed with the applicable sellers, provided that AFB Investment notifies the STOB and the SWX Swiss Exchange of such purchase by noon CET on the first trading day following such purchase, and further provided that AFB Investment must increase the price offered in the Tender Offer to the extent that the price paid under such purchase is higher than the price offered in the Tender Offer. AFB Investment does not, however, intend to acquire Ordinary Shares above the offer price.

Subject to certain exceptions, Rule 14e-5 prohibits a covered person from directly or indirectly purchasing or arranging to purchase any securities to be acquired in a tender offer for equity securities or any securities immediately convertible into, exchangeable for or exercisable for such securities, except as part of the tender offer. This prohibition applies from the time the offer is publicly announced until it expires. Rule 14e-5 defines a covered person as (i) the offeror, its dealer-managers, and any of their respective affiliates, (ii) any advisors of the foregoing whose compensation is dependent on the completion of the offer; and (iii) any person acting in concert either directly or indirectly with any of the foregoing. Purchase of an Ordinary Share by AFB Investment and other covered persons acting on its behalf of Ordinary Shares outside the Tender Offer would not fall within any of the excepted activities specifically outlined in Rule 14e-5. Accordingly, in the absence of exemptive relief, such a purchase, although permitted and regulated by the Swiss Rules, is prohibited under Rule 14e-5 after the public announcement of the Tender Offer. In this regard, Swiss insider trading rules and practice would have made the purchase of Ordinary Shares prior to announcement of the Tender Offer difficult.

In our view, there are serious doubts as to whether the jurisdictional predicate for the application of the Exchange Act -- namely that there be a purchase of a security "by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange" -- would be satisfied if AFB Investment, CVC, their affiliates or financial institutions acting on their behalf, made purchases of, or arrangements to purchase, Ordinary Shares outside the United States. We nonetheless apply, on behalf of such persons, for exemptive relief for such purchases from the provisions of Rule 14e-5 pursuant to Rule 14e-5, on the conditions set forth below. We have been requested by AFB Investment to emphasise that this letter does not reflect an admission that Rule 14e-5 would apply to such a purchase of Ordinary Shares outside the United States in the absence of such exemptive relief.

REQUESTED EXEMPTIVE RELIEF

Based on the foregoing, we respectfully request that CVC and AFB Investment and any affiliates of CVC and any broker or other financial institution acting as their agent (including any financial institution acting as financial advisor to CVC or AFB in connection with the Tender Offer) (the Prospective Purchasers ), be granted exemptive relief from the provisions of Rule 14e-5 in order to permit the purchase of Ordinary Shares outside the Tender Offer by any Prospective Purchaser that would otherwise be prohibited by Rule 14e-5, subject to the following conditions:

No purchases or arrangements to purchase Ordinary Shares, otherwise than pursuant to the Tender Offer, will be made in the United States;

Disclosure of the possibility of such purchase by the Prospective Purchasers, otherwise than pursuant to the Tender Offer, will be included prominently in a supplementary announcement that will be disseminated through Bloomberg and Reuters in the same manner as the other English language Tender Offer materials following receipt of the relief requested in this letter and prior to the purchase of any Ordinary Shares;

While Swiss law does not require the public disclosure of such purchases, the Prospective Purchasers shall disclose information regarding such purchases through announcements on Bloomberg and Reuters in the same manner as the other English language Tender Offer materials;

The Prospective Purchasers shall disclose to the Division of Market Regulation of the Commission (the Division of Market Regulation ) upon request, a daily time-sequenced schedule of all purchases of Ordinary Shares made by any of them during the Tender Offer, on a transaction-by-transaction basis, including: size, broker (if any), time of execution, price of purchase and, if not executed on the SWX Swiss Exchange, the exchange, quotation system, or other facility through which the purchase occurred;

Upon request of the Division of Market Regulation, the Prospective Purchasers shall transmit the information specified in (d) above to the Division of Market Regulation at its offices in Washington, D.C. within 30 days of its request;

The Prospective Purchasers shall comply with the applicable requirements under Swiss law;

The Prospective Purchasers shall retain all documents and other information required to be maintained pursuant to this exemption for a period of not less than two years from the date of the termination of the Tender Offer;

Representatives of the Prospective Purchasers shall be made available (in person at the offices of the Division of Market Regulation in Washington, D.C. or by telephone) to respond to inquiries of the Division of Market Regulation relating to such records; and

Except as otherwise exempted herein, the Prospective Purchasers shall comply with Rule 14e-5.

The Commission has granted a number of exemptions from Rule 10b-13 (the predecessor to Rule 14e-5) and Rule 14e-5 itself, to permit purchases by offerors and persons acting on behalf of offerors. In response to the letter regarding the offer by Crown Cork & Seal Company Inc. for CarnaudMetalbox (publicly available December 20, 1995) (the Crown Cork Letter ) exemptive relief was granted by the Commission for market purchases following announcement, and after expiration, of a French offer on the basis of compliance by the bidder with (i) French rules governing takeover offers and market purchases in connection with such offers and (ii) other conditions substantially identical to those listed above (except for condition (b) where disclosure of the possibility of a purchase outside of the offer will be included in a supplementary document instead of in the original offer document). Further, in response to the letter regarding the proposed offer by Kingfisher plc for Castorama Dubois Investissements SCA, (dated June 4, 2002) (the Kingfisher Letter ) the Commission, subject to similar conditions, granted exemptive relief for similar purchases during the French offer period.

We believe that the same rationale for granting relief in the circumstances described in the Crown Cork and Kingfisher Letters applies to exemptive relief for the market purchase of Ordinary Shares during the Swiss offer period in connection with the Tender Offer provided that the applicable Swiss rules governing offers and market purchases and the conditions listed above are complied with.

In the context of bids conducted under the United Kingdom City Code on Take-overs and Mergers (the City Code ) exemptive relief also has been granted. Like the City Code, the Swiss rules require public reporting to the relevant authority on a daily basis of transactions (including purchases outside the offer) by bidders and 5% shareholders with respect to target securities. We refer to the letter regarding the offer by Glaxo plc for Wellcome plc (available 7 February 1995), the letter regarding the offer by PacifiCorp for The Energy Group PLC (available 23 June 1997) and the letter regarding the offer by Schlumberger Limited for Sema Group plc (available February 15, 2001) as representative examples of letters that have been granted in the context of UK offers.

CONCLUSION

Pursuant to Regulation 200.81, we respectfully request on behalf of CVC that this exemptive request and the response be accorded confidential treatment until 120 days after the date of the response to such request or such earlier date as the staff of the Commission is advised that all of the information in this letter has been made public. This request for confidential treatment is made on behalf of CVC for the reason that certain of the facts set forth in this letter have not been made public.

In compliance with Securities Act Release No. 6269 (5 December 1980), seven additional copies of this letter are enclosed.

In view of the short timetable, we respectfully request that the Commission issue the requested exemptive relief as soon as practicable. If you require any further information or have any questions, please contact the undersigned on +44 20 7832 7429.

Very truly yours

Sarah Murphy

http://www.sec.gov/divisions/marketreg/mr-noaction/fbd031705.htm

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Modified: 05/18/2005