February 24, 2006
Via facsimile to ((404) 572-6999) and U.S. Mail
F. Donald Nelms, Jr., Esq.
Powell Goldstein LLP
One Atlantic Center - Fourteenth Floor
1201 West Peachtree Street, NW
Atlanta, GA 30309
Re: Yadkin Valley Company
Preliminary Schedule 14A
Filed January 24, 2006
File No. 000-28356
Schedule 13E-3
Filed January 24, 2006
File No. 005-54285
Dear Mr. Nelms:
We have reviewed the above filings for compliance with Rule
13e-3 and have the following comments. Where indicated, we think
you
should revise your documents in response to these comments. If
you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with supplemental information so we may better
understand your disclosure. After reviewing this information, we
may
or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Preliminary Schedule 14A
Summary term sheet, page 4
1. We note that your board may elect not to effect the stock split
despite security holder approval. Please disclose this in the
summary. Also, describe here, and where appropriate in the proxy
statement, the circumstances under which the board may choose to
abandon the going private transaction with as much specificity as
possible.
2. We note on page 36 that holders of approximately 61% of your
outstanding securities have indicated they will vote for the
reverse
stock split and that if they do so, the proposal will be approved.
Please disclose this prominently in the summary term sheet.
Questions and Answers
Why has the board of directors chosen this course of action?, page
3
3. Please quantify here the costs described in this answer.
May I buy additional shares in order to remain a stockholder...?,
page 4
4. Please expand this section to describe the steps holders of
shares
in street name may take to consolidate holdings and remain a
security
holder. You may also explain how holders may ensure that all of
their holdings may be cashed out name.
Special Factors
Background of the Transaction - Introduction, page 6
5. Please expand the fifth paragraph to quantify the percent of
assets attributable to equity investments. Further, expand the
background section to provide more information on how the board
considered these investments with regard to considering the going
private transaction. In this regard, while we note the board`s
concern with revenue enhancement, it is unclear what consideration
they gave to these assets, if any, in determining to take the
company
private.
Background of the Transaction - Costs Associated with SEC
Regulations, page 6
6. Please reconcile your estimate of SEC-related fees paid during
2005 of $115,000 to your estimate of future savings of $84,000
(page
11). We also note that your disclosure in this section states
that
the $115,000 figure does not include the cost of the time and
resources "in preparation of these reports and compliance with
reporting obligations" while the table on page 11 includes savings
of
$5,000 for management costs. Please explain.
Background of the proposal - Background of Board of Directors`
Recommendation, page 7
7. We note that your board discussed the transaction initially in
April 2004 and again in April 2005. Please describe any
discussions
held by your board or your management during the intervening
period.
8. We note in the first full paragraph of page 8 that Mr. Holding
Sr.
was contacted due to his experience in the issues discussed by
your
board. Disclose also Mr. Holding Sr.`s affiliation with your
company
and whether this affiliation influenced the board`s decision to
select Mr. Holding Sr. over any other similarly experienced
individual.
9. To the extent that the presentation to Mr. Perry differed from
the
presentation made to the board on August 18, 2005, please expand
to
address.
Purposes of the Reverse Stock Split, page 11
10. Please quantify the savings you expect from the reduction in
small stockholder account administration.
Recommendation of the Board of Directors; Fairness of the Reverse
Stock Split, page 14
11. Please note that the determination as to the fairness of the
transaction must be made to the unaffiliated security holders.
See
Item 8 of Schedule 13E-3. We note, for example, the references to
the board`s determination that the transaction is fair to "the
Company and its stockholders." Revise throughout the document to
ensure that any determination of fairness relates to the
unaffiliated
security holders.
12. Revise your document to ensure that you have provided a
reasonably detailed discussion of each material factor forming the
basis for your fairness determination in accordance with Item
1014(b)
of Regulation M-A. For example, we note the lack of a liquidation
value. If this value was not material to this transaction please
explain it in your disclosure. If the value was disregarded or
not
considered despite being material, please discuss the related
reasons. If the liquidation indicated a higher value than the $78
per share to be paid to the security holders, your discussion
should
address that difference and include a statement as to the basis
for
the belief that the transaction is fair despite the difference in
value. See Question 20 in Exchange Act Release No. 17719 (April
13,
1981) for guidance in revising your disclosure.
13. With respect to the book value analysis, please explain why
your
board concluded that it was less meaningful than the net asset
value.
Did your board calculate a book value? Did it result in a higher
value than the net asset value? If so, what was the book value
determined by your board?
14. With respect to the discounted cash flow analysis considered
by
your board, please disclose whether the board determined a
valuation
of the company on this basis. If so, disclose that value.
15. Refer to the seventh bullet point. It appears that the
special
committee and board of directors considered the presentation and
opinion of Howe Barnes. If any filing person has based their
fairness determination on the analysis of factors undertaken by
others, such person must expressly adopt this analysis and
discussion
as their own in order to satisfy the disclosure obligation. See
Question 20 of Exchange Act Release No. 34-17719 (April 13, 1981),
which states that a mere reference to an extract from the
financial
advisor`s report will not be sufficient. Please revise
accordingly.
16. We note additionally that Howe Barnes` opinion addresses
fairness
as to all security holders regardless of their continuing interest
in
your securities or their unaffiliated status. Note that your
fairness determination must be made with respect to unaffiliated
security holders who will be cashed out and those who will
continue
holding your securities. If your board relied and adopted Howe
Barnes` analysis, please explain whether your board considered
this
fact in its analysis.
17. Refer to the first sentence after the bullet point on page 16.
Given that your board of directors is required to make a fairness
determination, as described above, please explain how it is
difficult
to determine whether your board "as a whole" reached any
conclusions
from the analyses set forth above this disclosure. Also, disclose
the "certain ... compelling" facts that were discussed at great
length.
18. We note that the transaction does not include any of the
features
set forth in Item 1014(c)-(e) of Regulation M-A, which are
indicators
of procedural fairness. As a result, please explain how your
board
determined that the transaction is procedurally fair.
19. Refer to the last paragraph in this section (page 17).
Clarify
that the "Company`s affiliates" are the remaining filing persons
and
name them.
Opinion of Independent Financial Advisor
20. We note in Howe Barnes` opinion that it received financial
forecasts from your management. Please disclose these forecasts
in
an appropriate location in your proxy statement.
Yadkin Valley Company Background Information, page 19
21. Please explain the meaning or relevance of the first sentence
on
page 20.
Income Valuation Methodology - Discounted Cash Flow Analysis, page
21
22. We note that Howe Barnes did not conduct a discounted cash
flow
analysis due to your limited "cumulative profitability." Please
explain how your cumulative profitability prevented Howe Barnes
from
conducting this analysis. We also note that on an annual basis,
you
appear to have had net income and positive cash flows in some
years
during the period identified in your disclosure.
Income Valuation Methodology - Net Asset Value Methodology, page
21
23. Please reconcile aggregate value of the third-party securities
you held as of June 30, 2005 from page 21 ($19,623,406) to page 22
($22,605,851).
Income Valuation Methodology - Lack of Marketability Discount,
page
22
24. Please explain how Howe Barnes determined that discount rates
of
40-60% for lack of marketability were the most appropriate
indicators
of value. Disclose the industry averages.
Income Valuation Methodology - Going Private Premium Analysis,
page
23
25. We note you have listed 20 transactions considered by Howe
Barnes
in this analysis. We also note that Howe Barnes based its review
on
certain transactions deemed comparable. Please disclose whether
the
transactions on which Howe Barnes based its review are the same 20
transactions listed. If not, explain how and why Howe Barnes
selected a subset of the listed transactions and list the subset.
General Effects of the Reverse Stock Split, page 25
26. With respect to the Note included at the end of the table on
page
25, clarify that security holders who hold shares in more than one
account may pool their holdings in one account and continue
holding
your securities after the reverse stock split.
Certain United States Federal Income Tax Consequences, page 28
27. Revise the title to this section to eliminate the term
"certain."
Dissenters` Rights, page 34
28. We note your disclosure that "stockholders who receive cash
for
some or all of their stock and take the necessary steps to perfect
their rights are entitled to" dissenters` rights. We also note
that
a security holder who votes his or her shares for your proposal
may
not exercise dissenters` rights. Please clarify whether the
receipt
of cash may be deemed a consent for the corporate action and thus
result in the loss of dissenters` rights under North Carolina law.
Additional Special Meeting Information
Authority to Adjourn Special Meeting, page 38
29. The staff does not view a postponement or adjournment for the
purpose of soliciting additional proxies as a matter "incident to
the
conduct of the meetings," as described in Rule 14a-4(c)(7).
Accordingly, discretionary authority cannot be used to adjourn a
meeting as described in this section. We would consider an
adjournment to solicit additional proxies to be a substantive
matter
requiring its own vote using a specific, separately enumerated
item
on the proxy card. If you wish to obtain authority to adjourn the
meeting to solicit additional proxies, please revise your proxy
card
and disclosure accordingly.
Appendix B. Opinion of Independent Financial Advisor
30. We note that the fairness opinion may not be used by third
parties, including Yadkin Valley security holders, without Howe
Barnes` prior written consent. Revise the fairness opinion to
make
clear, if true, that unaffiliated security holders may rely upon
the
opinion when making their evaluation. See Section II.D.1 of our
Current Issues Outline for further guidance.
* * * *
As appropriate, please amend your filings in response to
these
comments. You may wish to provide us with marked copies of the
amended filings to expedite our review. Please furnish a cover
letter with your amended filing that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amended filings and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all material information to
investors. Since the company, its management and the filing
persons
are in possession of all facts relating to a company`s disclosure,
they are responsible for the accuracy and adequacy of the
disclosures
they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from each of the company and the
additional
filing persons acknowledging that:
* the company or filing person, as applicable, is responsible for
the
adequacy and accuracy of the disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company or filing person, as applicable may not assert staff
comments as a defense in any proceeding initiated by the
Commission
or any person under the federal securities laws of the United
States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
Please direct any questions to me at (202) 551-3619 or, in
my
absence, to Pam Carmody, Special Counsel, at (202) 551-3265. You
may
also contact us via facsimile at (202) 772-9203. Please send all
correspondence to us at the following ZIP code: 20549-3628.
Sincerely,
Daniel F. Duchovny
Attorney-Advisor
Office of Mergers & Acquisitions
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F. Donald Nelms, Jr., Esq.
Powell Goldstein LLP
February 24, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-3628
DIVISION OF
CORPORATION FINANCE