ALJ/MLC/tcg - California



ALJ/DB3/ek4PROPOSED DECISIONAgenda ID #15540RatesettingDecision BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIAIn the Matter of the Joint Application of GetGo Communications LLC (U7241C), formerly known as Citrix Communications, LLC, Grasshopper Group, LLC (U7197C), Citrix Systems, Inc., and LogMeIn, Inc., Authorization to Transfer of Control of GetGo Communications LLC (U7241C), formerly known as Citrix Communications, LLC, and Grasshopper Group, LLC (U7197C) Pursuant to California Public Utilities Code Section 854 and Request for Expedited Ex Parte Relief.Application 16-10-014(Filed October 13, 2016)DECISION GRANTING JOINT APPLICATION TO AUTHORIZE THE TRANSFER OF CONTROL OF CITRIX SYSTEMS, INC., GETGO COMMUNICATIONS, LLC, FORMERLY KNOWN AS CITRIX COMMUNICATIONS, LLC, AND GRASSHOPPER GROUP, LLC TO LOGMEIN, INC.SummaryThis decision grants the joint application of Citrix Systems, Inc., GetGo Communications, LLC (U7241C) (formerly known as Citrix Communications, LLC), Grasshopper Group, LLC (U7197C), and LogMeIn, Inc., for approval to transfer control of GetGo Communications and Grasshopper Group to LogMeIn, Inc., pursuant to California Public Utilities (Cal. Pub. Util.) Code § 854. The transfer of control will be accomplished through a series of transactions known as a Reverse Morris Trust transaction. The proceeding is closed.BackgroundOn July 26, 2016, Citrix Systems, Inc., (Citrix) and LogMeIn, Inc., (LogMeIn) announced that their respective boards of directors had approved a merger agreement whereby the companies would merge using a Reverse Morris Trust transaction. The resulting company will be valued at approximately $1.8 billion. This Reverse Morris Trust transaction will be accomplished by Citrix creating a wholly owned subsidiary, GetGo, Inc., a Delaware corporation (GetGo, Inc.), to hold the GoTo family of businesses, specifically GetGo Communications, LLC, (GetGo), GetGo Communications Virginia LLC, (GetGo Virginia) and Grasshopper Group, LLC (Grasshopper). Citrix then plans to distribute that subsidiary to Citrix shareholders in a spin-off transaction. Immediately thereafter, GetGo., Inc., will be merged with LogMeIn, Inc., with GetGo., Inc., surviving the merger and remaining as a wholly owned subsidiary of LogMeIn, Inc. This will result in Citrix shareholders owning approximately 50.1 percent of all outstanding shares of the reorganized company, and LogMeIn shareholders owning approximately 49.9 percent of the reorganized company. Exhibit E to the application shows the pre-transaction ownership structure, and Exhibit F to the application shows the post-transaction ownership structure.On October 13, 2016, Citrix, GetGo, Grasshopper and LogMeIn (Joint Applicants) filed a joint application with the California Public Utilities Commission (Commission) for approval of this series of transactions as it pertains to the Joint Applicants’ assets and operations in California. As explained by the Joint Applicants, because these changes will occur at the holding company level, this joint application does not seek authority for the assignment of any certificates, assets or customers. Further, because the transfer of control does not involve any changes in rates, terms or conditions of service, the joint application does not seek authority for changes to California customers’ rates, terms or conditions of service. There were no responses or protests from the applicants.The Joint ApplicantsTransferor Citrix is a Delaware corporation, with its principal place of business at 851 West Cypress Road, Fort Lauderdale, Florida 33309. Citrix Systems currently has two wholly owned subsidiaries authorized to engage in intrastate telecommunications services in California: GetGo Communications, LLC, and Grasshopper Group, LLC.Transferor Grasshopper is a Massachusetts limited liability company with its principal place of business at 197 1st Avenue, Suite 200, Needham, Massachusetts 02492. On June 17, 2010, Grasshopper was authorized to provide competitive intrastate interexchange telecommunications services within the State of California.Transferor GetGo is a Delaware limited liability company with its principal place of business at 10 Exchange Place, Suite 1710, Jersey City, New Jersey 07302. On January 11, 2013, GetGo (then known as Citrix Communications), was authorized to provide resold and limited facilities-based local exchange telecommunications services and interexchange service within the state of California.Transferee LogMeIn is a Delaware corporation, with its principal place of business at 320 Summer Street, Boston, Massachusetts 02210. It does not currently provide any domestic telecommunications service of any kind, but relies on third parties for such services.Transferee GetGo., Inc., is a Delaware corporation which, after the proposed transaction, will hold the assets of GetGo, GetGo Virginia, and Grasshopper. GetGo, Inc. will be a wholly owned subsidiary of LogMeIn.3.JurisdictionTwo of the Joint Applicants, GetGo (U7241C) and Grasshopper (U7197C) hold certificates of public convenience and necessity (CPCNs) issued by this Commission. Under Pub. Util. Code § 854, the Commission has the authority to approve transfers of control of entities it regulates.4.Standard for Approval of Transfer of Control Under § 854California Pub. Util. Code § 854(a) provides:No person or corporation, whether or not organized under the laws of this state, shall merge, acquire, or control either directly or indirectly any public utility organized and doing business in this state without first securing authorization to do so from the commission. The commission may establish by order or rule the definitions of what constitute merger, acquisition, or control activities which are subject to this section. Any merger, acquisition, or control without that prior authorization shall be void and of no effect. No public utility organized and doing business under the laws of this state, and no subsidiary or affiliate of, or corporation holding a controlling interest in a public utility, shall aid or abet any violation of this section.Applications filed with the Commission under §§ 851-854 shall fully comply with applicable Commission rules when their subject matter is acquiring a controlling interest of a reseller, or the acquisition by a reseller of another public utility.As noted above, the Joint Applicants filed this application for approval of the proposed transfer of control before the action takes place, and the Joint Applicants have expressed their intention to delay implementation of the merger as to California assets and operations until such approval is granted by this Commission.5.Public Interest in Approving the Transfer of ControlThe standard generally applied by the Commission to determine if a transaction should be approved under § 854(a) is whether the transaction will be “adverse to the public interest.” Sections 854(b) and 854(c) do not expressly apply to the instant transaction because, according to the Joint Applicants, none of them have gross annual California revenues exceeding $500 million. When California revenues reach this threshold, § 854(b)(3) requires the Commission to seek an opinion on competitive impacts from the California Attorney General. Below this threshold, there is no such requirement.The Joint Applicants contend that Commission approval of the proposed transaction will promote the public interest and generate substantial public benefits. In addition to creating a broader platform for innovation, general merger synergies, and benefits related to the integration of GoTo’s products and services with the complementary products and services of LogMeIn, the proposed transaction will promote competition among telecommunications carriers and other service providers in the delivery of communications solutions for consumers and businesses.6.Procedural BackgroundThis is an unopposed application for approval of a transfer of control, where the resulting entity will, for the foreseeable future, perform the same business functions, under the same management, as it does now. Approval of this application for transfer of control will permit the Joint Applicants to complete a corporate restructuring of assets and operations in California, consistent with their other national and international subsidiaries.7.Managerial QualificationsUpon completion of the proposed transfer of control, LogMeIn’s President & Chief Executive Officer and its Chief Financial Officer will continue in their respective roles. Several members of GetGo’s management team are expected to join the management team of the combined company. Finally, the Board of Directors of the combined company will consist of nine members, five current LogMeIn directors and four Citrix director appointees.8.Financial QualificationsWhen evaluating financial qualifications, the Commission will consider whether the carrier's day-to-day operations will be adversely affected or whether customers will receive the same services after the transfer of control. The Commission will also consider whether the carrier will have continued access to adequate financial resources and will retain the assets needed to operate after the transfer. Documentation must indicate that the entity to whom control is transferred, meets the requirements for issuance of a CPCN.Here, the proposed transaction will occur at the holding company level. This application does not seek authority for the assignment of any certificates, assets, or customers. It does not involve any changes in rates, terms, or conditions of service.Finally, the Joint Applicants submitted audited financial statements which demonstrate they have sufficient financial assets available, which satisfy the requirements for the issuance of a CPCN.9.California Environmental Quality Act (CEQA)The proposed transaction will simply result in a transfer of control of GetGo and Grasshopper to LogMeIn. It is entirely a “paper transaction”. No authority to construct or move any physical telecommunications facilities is requested by this application. Although GetGo is authorized to provide facilities based service, no change in operations is proposed at this time. It can therefore been seen with certainty that the application will have no significant adverse effect on the environment.10.Safety ConsiderationsAs the proposed transaction consists entirely of a paper transfer of control of certain entities and there will be no change in the services offered, rates or terms of service, it can be seen with certainty that this application does not pose any safety considerations.11.DiscussionThe issue before the Commission is whether the joint application for the transfer of control of GetGo and Grasshopper is in the public interest and should be granted.Here, the Commission should approve the transfer of control of the assets and operations in California of two California CPCN holders, GetGo and Grasshopper. This restructuring has been approved by the Board of Directors of each affected company, and will result in tax savings to benefit the resulting corporation and its shareholders, and a stronger, more robust provider of a variety of communications services to consumers. The application is unopposed.13.ConclusionThe joint application for the transfer of control of GetGo and Grasshopper is in the public interest, can be seen with certainty to not have any significant adverse effect on the environment, and should be approved.14.Categorization and Need for HearingIn Resolution ALJ 176-3387, filed October 27, 2016, the Commission preliminarily determined that the category for this proceeding is ratesetting and that no evidentiary hearing would be needed. We affirm these preliminary determinations.ments on Proposed DecisionThis is an uncontested matter in which the decision grants the relief requested. Accordingly, pursuant to Pub. Util. Code § 311(g)(2) and Rule 14.6(c)(2), the otherwise applicable 30-day period for public review and comment is waived.16.Assignment of ProceedingLiane M. Randolph is the assigned Commissioner and Dan H. Burcham is the assigned Administrative Law Judge in this proceeding.Findings of FactCitrix Systems, Inc., is a Delaware corporation, with its principal place of business at 851 West Cypress Road, Fort Lauderdale, Florida 33309. Citrix Systems, Inc., currently has two wholly owned subsidiaries authorized to engage in intrastate telecommunications services in California: GetGo Communications, LLC, and Grasshopper Group, LLC.Grasshopper Group, LLC, is a Massachusetts limited liability company with its principal place of business at 197 1st Avenue, Suite 200, Needham, Massachusetts 02492. Grasshopper Group, LLC, is authorized to provide competitive intrastate interexchange telecommunications services within the State of California pursuant to D.10-06-026.LogMeIn, Inc., is a Delaware corporation, with its principal place of business at 320 Summer Street, Boston, Massachusetts 02210.GetGo Communications, LLC, is a Delaware limited liability company with its principal place of business at 10 Exchange Place, Suite 1710, Jersey City, New Jersey 07302.GetGo Communications, LLC, (formerly known as Citrix Communications), is authorized to provide resold and limited facilities-based local exchange telecommunications services and interexchange service within the state of California pursuant to D.13-01-013.GetGo, Inc., is a Delaware corporation which will hold the assets of GetGo, GetGo Virginia and Grasshopper at the conclusion of the proposed transaction.GetGo, Inc., will be a wholly owned subsidiary of LogMeIn, Inc., at the conclusion of the proposed transaction.The proposed transaction does not pose any significant effects on the environment under the California Environmental Quality Act.The proposed transaction is in the public interest.Conclusions of LawThe Joint Application for transfer of control of GetGo Communications, LLC, and Grasshopper Group, LLC to LogMeIn, Inc., is in the public interest.The Joint Application for transfer of control of GetGo Communications, LLC, and Grasshopper Group, LLC, to LogMeIn, Inc., will not have any significant environmental effects under the California Environmental Quality Act.The Joint Application for transfer of control of GetGo Communications, LLC, and Grasshopper Group, LLC to LogMeIn, Inc., should be granted.This proceeding should be closed.ORDERIT IS ORDERED that:The Joint Application for transfer of control of GetGo Communications, LLC, and Grasshopper Group, LLC, to LogMeIn, Inc., is approved.Application 16-10-014 is closed.This order is effective today.Dated , at San Francisco, California. ................
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