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EXHIBIT 99.3
[SOUTHDOWN LETTERHEAD]
, 1998
Milbank, Tweed, Xxxxxx & XxXxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 0000
Xxxxxxxxx & Xxxxxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Re: March 17, 1998 Agreement and Plan of Merger ("Merger
Agreement") among Southdown, Inc. ("Southdown"), Bedrock
Merger Corp. ("Bedrock") and Medusa Corporation ("Medusa").
Gentlemen:
We furnish this letter to you in connection with your opinion as to
certain federal income tax consequences of the proposed merger contemplated by
the Merger Agreement. Capitalized terms not otherwise defined have meanings
assigned to them in Joint Proxy Statement/Prospectus dated , 1998 of
Southdown and Medusa. The Merger is described in detail in the Agreement.
To enable you to render your opinion, we make the following
representations:
1. At the time of the Merger, the fair market value of the
Southdown Common Stock and other consideration received by
each Medusa shareholder will be approximately equal to the
fair market value of the Medusa Shares surrendered in the
exchange.
2. Neither Southdown nor any of its affiliates has any plan or
intention to reacquire any Southdown stock issued in the
Merger.
3. Neither Southdown nor any of its affiliates now, or at any
time during the past five years, owns or has owned any shares
of Medusa capital stock.
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4. Immediately following the Merger, Medusa will hold at least
90 percent of the fair market value of its net assets and at
least 70 percent of the fair market value of its gross assets
and all of Bedrock's net assets and all of Bedrock's gross
assets held immediately prior to the Merger. For purposes of
this representation, amounts paid to Medusa shareholders who
receive cash or other property, amounts used by Medusa to pay
reorganization expenses, and all redemptions and distributions
(except for regular, normal dividends) made by Medusa will be
included as assets of Medusa or Bedrock, respectively,
immediately prior to the Merger.
5. Prior to the Merger, Southdown will own 100 percent of the
total combined voting power and 100 percent of the total
number of shares of each Bedrock stock class.
6. Southdown has no plan or intention to liquidate Medusa; to
merge Medusa with or into another corporation; to sell or
otherwise dispose of the stock of Medusa except for transfers
of stock to a member of Southdown's qualified group(1) or to a
partnership in which Southdown (or a member of Southdown's
qualified group) is a partner and owns at least a one-third
interest in the partnership and has active and substantial
management functions as a partner in the partnership.
7. Other than closing down Medusa's Cleveland headquarters,
Southdown has no plan or intention to cause Medusa to sell or
otherwise dispose of any of its assets except for dispositions
to be made in the ordinary course of business or transfers of
assets to a member of Southdown's qualified group or to a
partnership of which Southdown (or a member of Southdown's
qualified group) is a partner and owns at least a one-third
interest in the partnership and has active and substantial
management functions as a partner in the partnership.
8. Bedrock will have no material liabilities assumed by Xxxxxx,
and will not transfer to Medusa any assets subject to material
liabilities, in the Merger.
9. Following the transaction, Medusa will continue its historic
business and use a significant portion of its historic
business assets.
10. Other than as provided in the Merger Agreement, Southdown will
pay all of Bedrock's expenses, if any, incurred in connection
with the Merger.
11. There is no intercorporate indebtedness existing between
Southdown and Medusa or between Bedrock and Medusa that was
issued, acquired, or will be settled at a discount.
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(1) Treas. Reg. Section 1.368-1(d)(4)(ii) defines a qualified group as
including Southdown and all its direct and remote subsidiaries, 80% of
the voting stock of which and 80% of all other classes of stock of
which are owned by one or more members of Southdown's qualified group.
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12. Neither Southdown nor Bedrock is a regulated investment
company, a real estate investment trust, or a corporation
fifty percent or more of the value of whose total assets are
stock and securities, and eighty percent or more of the value
of whose total assets are assets held for investment. In
making the percentage determinations under the preceding
sentence, stock and securities in any subsidiary corporation
are disregarded and the parent corporation is deemed to own
its ratable share of the subsidiary's assets, and a
corporation is considered a subsidiary if the parent owns
fifty percent or more of the combined voting power of all
classes of stock entitled to vote or fifty percent or more of
the total value of shares of all classes of stock outstanding.
13. The statutory and nonstatutory stock options to acquire
Southdown Common Stock to be received by Medusa option holders
will not be actively traded on an established securities
market and will not be transferable except by will or by the
laws of descent and distribution.
14. The Merger will enhance Southdown's ability to capitalize on
strong industry fundamentals and the growth in cement
consumption that is expected to result from proposed increases
in federal and state infrastructure spending.
15. The Merger will result in the second largest and most modern
cement plant manufacturing system in the United States. The
expanded network of preheater/precalciner facilities should
present additional opportunities for cost effective capacity
expansions and earnings growth.
16. Medusa's operations complement Southdown's existing asset
base, and the combined network of plants and distribution
terminals will provide broad coverage of the markets east of
the Mississippi River.
17. The Merger will create a significantly larger company with
greater financial flexibility, a strong balance sheet, higher
market capitalization and greater earnings and cash flows, all
of which should enhance shareholder value by enabling
Southdown to realize its growth potential and pursue
attractive business opportunities in the future.
Unless written notification to the contrary is received by you prior to
the Merger, these representations will continue to be true and correct at all
times from today through the day of the Merger.
Very truly yours,
Southdown, Inc.
By:
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Title:
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