424B3 1 d827305d424b3.htm PROSPECTUS Prospectus
Table of Contents

 

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-200704

PROSPECTUS—OFFER TO EXCHANGE

DANAHER CORPORATION

Offer to Exchange All Common Units of

POTOMAC HOLDING LLC

which are owned by Danaher Corporation

and will be converted into Shares of Common Stock of

NETSCOUT SYSTEMS, INC.

for

Shares of Common Stock of Danaher Corporation

 

 

Danaher Corporation (“Danaher”) is offering to exchange all common units representing limited liability company interests (“Newco common units”) of Potomac Holding LLC (“Newco”) which are owned by Danaher for shares of common stock of Danaher (“Danaher common stock”) that are validly tendered and not properly withdrawn. The number of shares of Danaher common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio, the number of Newco common units offered and the number of shares of Danaher common stock tendered. The terms and conditions of this exchange offer are described in this prospectus, which you should read carefully. None of Danaher, Newco any of their respective directors or officers or any of their respective representatives makes any recommendation as to whether you should participate in this exchange offer. You must make your own decision after reading this prospectus and consulting with your advisors.

Following consummation of the exchange offer, a wholly-owned subsidiary of NetScout Systems, Inc. (“NetScout”) named RS Merger Sub I, Inc., a Delaware corporation (“Merger Sub”), will be merged with and into Newco, whereby the separate corporate existence of Merger Sub will cease and Newco will continue as the surviving company (the “First Merger”), and, subsequently, Newco will be merged with and into a wholly-owned subsidiary of NetScout named RS Merger Sub II, LLC, a Delaware limited liability company (“Merger Sub II”), whereby the separate corporate existence of Newco will cease and Merger Sub II will continue as the surviving company (the “Second Merger,” and together with the First Merger, the “Mergers”). In the First Merger, each outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of common stock of NetScout (“NetScout common stock”) equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger. In addition, Newco will authorize the issuance of a number of Newco common units such that the total number of Newco common units outstanding immediately prior to the First Merger will be that number that results in the exchange ratio in the First Merger equaling one. As a result, each Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into one share of NetScout common stock in the First Merger. The aggregate number of shares of NetScout common stock to be issued in the First Merger by NetScout is expected to result in pre-First Merger holders of Newco common units and Newco employees collectively owning approximately 59.5% of the issued and outstanding shares of NetScout common stock on a fully-diluted basis after giving effect to the Mergers, and NetScout existing equityholders collectively owning approximately 40.5% of the issued and outstanding shares of NetScout common stock on a fully-diluted basis. Newco common units will not be transferred to participants in this exchange offer; such participants will instead receive shares of NetScout common stock in the First Merger. No trading market currently exists or will ever exist for Newco common units. You will not be able to trade the Newco common units before they are converted into shares of NetScout common stock in the First Merger. In addition, there can be no assurance that shares of NetScout common stock, when issued in the First Merger, will trade at the same prices as shares of NetScout common stock are traded prior to the First Merger.

The value of Danaher common stock and Newco common units will be determined by Danaher by reference to the simple arithmetic average of the daily volume-weighted average prices (“VWAP”) on each of the Valuation Dates (as defined below), of Danaher common stock on the New York Stock Exchange (“NYSE”) and NetScout common stock on the NASDAQ Global Market (“NASDAQ”) on each of the last three trading days (“Valuation Dates”) of the exchange offer period, as it may be voluntarily extended, but not including the last two trading days that are part of any Mandatory Extension (as described below). Based on an expiration date of July 8, 2015, the Valuation Dates are expected to be July 6, 2015, July 7, 2015, and July 8, 2015. See “This Exchange Offer—Terms of this Exchange Offer.”

This exchange offer is designed to permit you to exchange your shares of Danaher common stock for Newco common units at a 7% discount to the per-share value of NetScout common stock, calculated as set forth in this prospectus subject to the upper limit described below. For each $100 of Danaher common stock accepted in this exchange offer, you will receive approximately $107.53 of Newco common units, subject to an upper limit of 2.2522 Newco common units per share of Danaher common stock. This exchange offer does not provide for a minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.” If the upper limit is in effect, then the exchange ratio will be fixed at that limit and this exchange offer will be automatically extended (a “Mandatory Extension”) until 12:00 midnight New York City time, on the second trading day following the originally contemplated expiration date to permit stockholders to tender or withdraw their Danaher common stock during that period. IF THE UPPER LIMIT IS IN EFFECT, AND UNLESS YOU PROPERLY WITHDRAW YOUR SHARES, YOU MAY RECEIVE LESS THAN $107.53 OF NEWCO COMMON UNITS FOR EACH $100 OF DANAHER COMMON STOCK THAT YOU TENDER, AND YOU COULD RECEIVE MUCH LESS.

The indicative exchange ratio that would have been in effect following the official close of trading on the NYSE and NASDAQ, as applicable, on May 12, 2015 (the second to last trading day before the date of this prospectus), based on the daily VWAPs of Danaher common stock and NetScout common stock on May 8, 2015, May 11, 2015, and May 12, 2015, would have provided for 2.1796 Newco common units to be exchanged for every share of Danaher common stock accepted. The value of Newco common units received and, following the First Merger, the value of NetScout common stock received may not remain above the value of Danaher common stock tendered following the expiration of this exchange offer.

THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON JULY 8, 2015, UNLESS THE OFFER IS EXTENDED OR TERMINATED. SHARES OF DANAHER COMMON STOCK TENDERED PURSUANT TO THIS EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION OF THIS EXCHANGE OFFER.

 

 

In reviewing this prospectus, you should carefully consider the risk factors beginning on page 49 of this prospectus.

We Are Not Asking You for a Proxy and You are Requested Not To Send Us a Proxy.

Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is May 14, 2015.


Table of Contents

TABLE OF CONTENTS

 

HELPFUL INFORMATION

  1   

QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

  7   

SUMMARY

  27   

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

  42   

RISK FACTORS

  49   

Risks Related to the Transactions

  49   

Risks Related to the Exchange Offer

  53   

Risks Related to the Combined Company’s Business Following the Transactions

  55   

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

  59   

THIS EXCHANGE OFFER

  61   

Terms of this Exchange Offer

  61   

Conditions for Consummation of this Exchange Offer

  75   

Fees and Expenses

  77   

Legal Limitations

  77   

Certain Matters Relating to Non-U.S. Jurisdictions

  77   

Distribution of Newco Common Units Remaining After This Exchange Offer

  78   

INFORMATION ON NETSCOUT

  79   

Overview

  79   

NetScout’s Business After the Transactions

  79   

NetScout’s Liquidity and Capital Resources After the Transactions

  81   

Directors and Officers of NetScout Before and After the Transactions

  82   

INFORMATION ON DANAHER

  86   

INFORMATION ON THE COMMUNICATIONS BUSINESS

  87   

The Company

  87   

Markets, Customers and Products

  87   

Strategy

  88   

Manufacturing and Materials

  89   

Sales, Distribution and Backlog

  89   

Research and Development

  89   

Seasonality

  90   

Competition

  90   

Intellectual Property

  90   

Working Capital

  90   

Employee Relations

  90   

Regulatory Matters

  90   

International Operations

  91   

Properties

  91   

Legal Proceedings

  92   

HISTORICAL MARKET PRICE DATA AND DIVIDEND INFORMATION

  93   

Comparative Historical and Pro Forma Per Share Data

  93   

Historical Common Stock Market Price and Dividend Data

  93   

NetScout Dividend Policy

  94   

Danaher Dividend Policy

  94   

SELECTED FINANCIAL STATEMENT DATA

  95   

Selected Historical Combined Financial Data of the Communications Business

  95   

Selected Historical Consolidated Financial Data of Danaher

  96   

Selected Historical Consolidated Financial Data of NetScout

  97   

Unaudited Combined Pro Forma Information of NetScout and the Communications Business

  99   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS FOR THE COMMUNICATIONS BUSINESS

  110   

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  110   

Basis of Presentation

  110   

 

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Overview

  111   

Results of Operations

  113   

Income Taxes

  118   

Inflation

  119   

Risk Management

  119   

Liquidity and Capital Resources

  120   

Critical Accounting Estimates

  121   

New Accounting Standards

  125   

THE TRANSACTIONS

  126   

Overview

  126   

Transaction Timeline

  127   

The Separation and the Distribution

  129   

The Mergers

  130   

Calculation of the Merger Consideration

  131   

Background of the Transactions

  131   

NetScout’s Reasons for the Transactions

  136   

Opinion of Netscout’s Financial Advisor

  139   

Certain Financial Forecasts Prepared by NetScout

  148   

Danaher’s Reasons for the Transactions

  154   

Certain Financial Forecasts Prepared by Danaher

  155   

Ownership of NetScout Following the Transactions

  157   

Board of Directors and Management of NetScout Following the Transactions

  157   

Interests of Certain Persons in the Transactions

  157   

Effects of the Distribution and the Mergers on Danaher Equity Awards

  158   

NetScout’s Stockholders Meeting

  158   

Accounting Treatment and Considerations

  159   

Regulatory Approvals

  159   

Federal Securities Law Consequences; Resale Restrictions

  160   

No Appraisal or Dissenters’ Rights

  160   

NASDAQ Listing

  160   

THE MERGER AGREEMENT

  161   

The Mergers

  161   

Closing; Effective Time

  161   

Merger Consideration

  161   

Exchange of Newco Common Units

  162   

Distribution With Respect to Shares of NetScout Common Stock After the Effective Time of the First Merger

  162   

Termination of the Distribution Fund

  162   

Conversion of Shares in the Second Merger

  163   

Adjustment Amount

  163   

Post-Closing NetScout Board of Directors and Officers

  163   

Stockholders’ Meeting

  163   

Representations and Warranties

  163   

Conduct of Business Pending Closing

  166   

SEC Filings

  169   

Regulatory Matters

  169   

No Solicitation

  170   

Board Recommendation

  172   

Covenant Not to Compete

  173   

Non-Solicitation of Employees

  174   

Certain Other Covenants and Agreements

  174   

Conditions to the Merger

  175   

Termination

  177   

Termination Fee Payable in Certain Circumstances

  178   

Expenses

  178   

 

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Specific Performance

  178   

Amendments

  178   

THE DISTRIBUTION AGREEMENT

  179   

The Separation

  179   

Conditions to the Separation

  184   

The Distribution

  184   

Conditions to the Distribution

  184   

NetScout Guarantee

  184   

Additional Covenants

  185   

Insurance

  185   

Mutual Releases; Indemnification

  185   

Amendment and Waiver

  187   

Termination

  187   

OTHER AGREEMENTS

  188   

Employee Matters Agreement

  188   

Tax Matters Agreement

  192   

Transition Services Agreement

  193   

Trademark License Agreement

  194   

IP License Agreement

  194   

DBS License Agreement

  194   

Lease Agreement

  194   

Voting Agreement

  195   

DESCRIPTION OF CAPITAL STOCK OF NETSCOUT AND THE COMBINED COMPANY

  197   

Common Stock

  197   

Preferred Stock

  197   

Certain Anti-Takeover Effects of Provisions of the NetScout Charter and the NetScout Bylaws

  197   

Listing

  198   

Transfer Agent

  198   

DESCRIPTION OF NEWCO COMMON UNITS

  199   

Newco Common Units

  199   

Newco Operating Agreement

  200   

COMPARISON OF RIGHTS OF HOLDERS OF DANAHER COMMON STOCK AND NETSCOUT COMMON STOCK

  203   

Authorized Capital Stock

  203   

Certain Anti-Takeover Effects of Provisions of the NetScout Charter, the NetScout Bylaws and Delaware Law

  208   

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS

  209   

Treatment of the Distribution

  209   

Treatment of the Mergers

  211   

Information Reporting and Backup Withholding

  212   

SECURITY OWNERSHIP OF NETSCOUT COMMON STOCK

  213   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  215   

LEGAL MATTERS

  215   

EXPERTS

  215   

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

  216   

INDEX TO FINANCIAL PAGES

  F-1   

This prospectus incorporates by reference important business and financial information about Danaher and NetScout from documents filed with the SEC that have not been included in or delivered with this prospectus. This information is available without charge at the website that the SEC maintains at www.sec.gov, as well as from other sources. See “Where You Can Find More Information; Incorporation By Reference.” You also may ask any questions about this exchange offer or request copies of the exchange offer documents and the other information incorporated by reference in this prospectus, without charge, upon written or oral request to Danaher’s information agent, Georgeson Inc., located at 480 Washington

 

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Boulevard, 26th Floor, Jersey City, NJ, 07310, at the telephone number (866) 295-3782 or at the email address danaherexchange@georgeson.com. In order to receive timely delivery of the documents, you must make your requests no later than June 30, 2015.

All information contained or incorporated by reference in this prospectus with respect to NetScout, Merger Sub, Merger Sub II and their respective subsidiaries, as well as information on NetScout after the consummation of the Transactions, has been provided by NetScout. All other information contained or incorporated by reference in this prospectus with respect to Danaher, Newco or their respective subsidiaries, or the Communications Business, and with respect to the terms and conditions of the exchange offer has been provided by Danaher. This prospectus contains or incorporates by reference references to trademarks, trade names and service marks, including AIRMAGNET®, FLUKE NETWORKS®, ARBOR NETWORKS®, TEKTRONIX® Communications and VSS MONITORING®, that are owned by Danaher and its related entities.

This prospectus is not an offer to sell or exchange and it is not a solicitation of an offer to buy any shares of Danaher common stock, Newco common units or NetScout common stock in any jurisdiction in which the offer, sale or exchange is not permitted. Non-U.S. stockholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the Newco common units that may apply in their home countries. Danaher, Newco and NetScout cannot provide any assurance about whether such limitations may exist. See “The Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

 

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HELPFUL INFORMATION

Certain abbreviations and terms used in the text and notes are defined below:

 

Abbreviation/Term

  

Description

Ancillary Agreements

   The Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Trademark License Agreement, the DBS License Agreement, the IP License Agreement, the Lease Agreement and any other agreements mutually agreed to by the parties pursuant to or in connection with the Distribution Agreement

Audited Financial Statements

   The audited combined financial statements of (x) the Communications Business and (y) Newco (before giving effect to the internal restructuring described in the Distribution Agreement), including the combined balance sheets of (x) the Communications Business and (y) Newco (before giving effect to the internal restructuring described in the Distribution Agreement) as of December 31, 2014 and December 31, 2013 and the three years in the period ended December 31, 2014 together with a report on the financial statements from the independent registered public accounting firm for the Communications Business

Code

   The Internal Revenue Code of 1986, as amended

Communications Business

   The communications group business of Danaher conducted under the brands Tektronix Communications, Fluke Networks and Arbor Networks, and including Newco and its subsidiaries; provided, however, that the “Communications Business” shall exclude Danaher’s data communications cable installation business and its communication service provider (field and test tools systems) business

Danaher

   Danaher Corporation

Danaher common stock

   The common stock, par value $0.01 per share, of Danaher

Danaher Equity Award

   Any Danaher Option that is issued and unexercised and any Danaher RSU that is issued and unvested, in each case at the effective time of the First Merger, and which is treated in each case in accordance with the Employee Matters Agreement

Danaher group

   Danaher and each of its subsidiaries, but excluding any member of the Newco group

Danaher Option

   Options to purchase shares of Danaher common stock from Danaher, whether granted by Danaher pursuant to the Danaher Stock Plans, assumed by Danaher in connection with any merger, acquisition or similar transaction or otherwise issued or granted and whether vested or unvested

Danaher RSU

   Each restricted stock unit representing the right to vest in and be issued shares of Danaher common stock by Danaher, whether granted by Danaher pursuant to a Danaher Stock Plan, assumed by Danaher in connection with any merger, acquisition or similar transaction or otherwise issued or granted and whether vested or unvested

Danaher Shared Contract

   Any contract relating to (but not relating primarily to) the Communications Business that also relates to any business or business function of the Danaher group to which Danaher, Newco or any member of their respective groups is a party or by which any of their respective assets is bound

 

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Abbreviation/Term

  

Description

Danaher Stock Plans

   Danaher’s 1998 Stock Option Plan, Danaher’s 2007 Stock Incentive Plan, Tektronix 2002 Stock Incentive Plan and Tektronix 2005 Stock Incentive Plan

DBS License Agreement

   The DBS License Agreement substantially in the form attached as Exhibit E to the Distribution Agreement

Debt Financing

   Any debt financing entered into by the NetScout Companies in connection with the Mergers, the Distribution and other transactions contemplated by the Transaction Documents, including the amendment of that certain Credit and Security Agreement, dated as of December 21, 2007, by and among NetScout, KeyBank National Association, Wells Fargo Bank, National Association, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bank of America, N.A., Silicon Valley Bank, Comerica Bank, and the lenders party thereto, as amended by First Amendment Agreement, dated as of December 4, 2009

DGCL

   General Corporation Law of the State of Delaware

The Distribution

   The distribution by Danaher, pursuant to the Merger Agreement, of 100% of the Newco common units to Danaher’s stockholders in an exchange offer followed, if necessary, by a spin-off

The Distribution Agreement

   The Separation and Distribution Agreement, dated as of October 12, 2014, by and among Danaher, NetScout and Newco (as the same may be amended from time to time)

Distribution Date

   The date selected by the Danaher board or its designee for the distribution of Newco common units to holders of Danaher common stock as of the record date in connection with the Distribution

Employee Matters Agreement

   The Employee Matters Agreement substantially in the form attached as Exhibit C to the Distribution Agreement

Exchange Act

   The Securities Exchange Act of 1934, as amended

The exchange offer

   An exchange offer whereby Danaher is offering to its stockholders the option to exchange all or a portion of their shares of Danaher common stock for all of the Newco common units, which Newco common units will be immediately exchanged for NetScout common stock in the Mergers

The First Merger

   The merger of Merger Sub with and into Newco, with Newco surviving the merger as a wholly-owned subsidiary of NetScout, as contemplated by the Merger Agreement

GAAP

   Generally accepted accounting principles in the United States

HSR Act

   The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended

Internal Restructuring

   The corporate structuring steps contemplated by the Plan of Reorganization

IP License Agreement

   The Intellectual Property Cross-License Agreement substantially in the form attached as Exhibit G to the Distribution Agreement

IRS

   Internal Revenue Service

IRS ruling

   Private letter ruling from the IRS with respect to certain aspects of the anticipated non-taxable nature of the Transactions

 

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Abbreviation/Term

  

Description

Lease Agreement

   The Commercial Lease Agreement substantially in the form attached as Exhibit F to the Distribution Agreement

The Merger Agreement

   The Agreement and Plan of Merger and Reorganization, dated as of October 12, 2014, by and among Danaher, Newco, NetScout, Merger Sub and Merger Sub II (as the same may be amended from time to time)

The Mergers

   The First Merger together with the Second Merger

Merger Sub

   RS Merger Sub I, Inc., which is a wholly-owned subsidiary of NetScout

Merger Sub II

   RS Merger Sub II, LLC, which is a wholly-owned subsidiary of NetScout

NASDAQ

   The NASDAQ Global Select Market

NetScout

   NetScout Systems, Inc.

NetScout Bylaws

   NetScout’s Amended and Restated Bylaws

NetScout Charter

   NetScout’s Third Amended and Restated Certificate of Incorporation

NetScout common stock

   The common stock, par value $0.001 per share, of NetScout

NetScout Companies

   NetScout and each of NetScout’s subsidiaries, including Merger Sub and Merger Sub II

NetScout Products

   Products or services (i) both (x) designated or developed and (y) sold, or (ii) under development and substantially completed, or (iii) manufactured, sold or distributed, in each of the foregoing (i), (ii) and (iii), by or on behalf of the NetScout Companies as of October 12, 2014, including the products listed in the NetScout disclosure letter to the Merger Agreement

NetScout Superior Offer

   An unsolicited bona fide written offer by a third party to purchase at least a majority of the outstanding shares of NetScout common stock or at least a majority of the assets of NetScout (whether through a tender offer, merger or otherwise), that is determined by the NetScout board of directors, in its good faith judgment, after consulting with its financial advisor and outside legal counsel, and after taking into account the terms and conditions of the offer, including the likelihood and anticipated timing of consummation, (i) to be more favorable, from a financial point of view, to NetScout’s stockholders than the combination with Newco, (ii) is reasonably likely to be completed, taking into account any financing and approval requirements that the NetScout board of directors determines to be relevant and all other financial, legal, regulatory and other aspects of such proposal that the NetScout board of directors determines to be relevant, and (iii) for which financing, if a cash transaction (in whole or part), is then fully committed

Newco

   Potomac Holding LLC, which is a Delaware limited liability company and currently a wholly-owned subsidiary of Danaher Corporation

Newco Assets

   Has the meaning ascribed to the Communications Assets in the Distribution Agreement

Newco common units

   Common units representing limited liability company interests in Newco

Newco Companies

  

Newco and its subsidiaries after giving effect to the transactions and

transfer of assets and liabilities as set forth in the Distribution Agreement

 

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Abbreviation/Term

  

Description

Newco Employee

   Each employee who as of the date of the Separation is an employee of Danaher’s Tektronix Communications business or Danaher’s Arbor Networks business and each employee of Danaher’s Fluke Networks Enterprise business who is determined to be either primarily dedicated to the Communications Business in the ordinary course or required for the ongoing operation of the Communications Business, and in all cases regardless of whether any such employee is actively at work as of the date of the Separation or is not actively at work as of the date of the Separation as a result of disability or illness, an approved leave of absence (including military leave with reemployment rights under federal law and leave under the Family and Medical Leave Act of 1993), vacation, personal day or similar short- or long-term absence

Newco group

   Newco, and each of the subsidiaries of Danaher contemplated to be owned (directly or indirectly) by Newco immediately prior to the Separation Time pursuant to the Plan of Reorganization

Newco Indemnitees

   Newco, each member of the Newco group, NetScout (from and after the Separation Time), each of their respective successors and assigns, all persons who are or have been stockholders, directors, partners, managers, managing members, officers, agents or employees of any member of the Newco group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns

Newco Independent Contractor

   Each independent contractor who as of the date of the Separation provides services to Danaher’s Tektronix Communications business or Danaher’s Arbor Networks business and each independent contractor providing services to Danaher’s Fluke Networks Enterprise business who is determined to be either primarily dedicated to the Communications Business in the ordinary course or required for the ongoing operation of the Communications Business

Newco IP

   (a) All intellectual property constituting, and all intellectual property rights embodied by, the Newco Products and for which Danaher has (or purports to have, including as a result of the transfers under the Distribution Agreement) ownership rights; and (b) all other material intellectual property rights with respect to which any of the Newco Companies has (or purports to have, including as a result of the transfers under the Distribution Agreement) an ownership interest

Newco operating agreement

   The Limited Liability Company Agreement of Potomac Holding LLC, dated as of October 11, 2014 (as may be amended)

Newco Products

   Products or services (i) both (x) designated or developed and (y) sold, or (ii) under development and substantially completed, or (iii) manufactured, sold or distributed, in each of the foregoing (i), (ii) and (iii), by or on behalf of the Communications Businesses or Newco Companies as of October 12, 2014, including the products listed in the Danaher disclosure letter to the Merger Agreement

Newco Shared Contract

   Any contract primarily relating to the Communications Business that also relates to any business or business function of the Danaher group to which Danaher, Newco or any member of their respective groups is a party or by which any of their respective assets is bound

New York City time

   Local time in the City of New York

NYSE

   The New York Stock Exchange

 

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Abbreviation/Term

  

Description

Operating Profit

   The earnings before income taxes of the Communications Business, taken as a whole, for the fiscal year ended December 31, 2013, calculated in a manner consistent with GAAP consistently applied but before (1) impairment of intangible assets, (2) intangible amortization, (3) stock based compensation, (4) corporate allocations and (5) allocations from Fluke Industrial or Tektronix Instruments, calculated in a manner consistent with the schedules to the Merger Agreement

Plan of Reorganization

   The plan to allocate and convey to Newco (or the applicable Newco Sub) (as defined in the Distribution Agreement) the Communications Assets (as defined in the Distribution Agreement), the Communications Liabilities (as defined in the Distribution Agreement) and ownership of the Newco Subs to reach the Newco structure as it will exist immediately prior to the Distribution

The Second Merger

   After the First Merger, the merger of Newco with and into Merger Sub II, with Merger Sub II surviving the merger, as contemplated by the Merger Agreement

Securities Act

   The Securities Act of 1933, as amended

The Separation

   The internal restructuring to separate and consolidate certain assets and liabilities used in the Communications Business under Newco pursuant to the Distribution Agreement and/or the transfer of certain assets or liabilities of the Communications Business directly to NetScout or one or more subsidiaries of NetScout pursuant to any other arrangement entered into between NetScout and Danaher to effect such transfer

Separation Date

   The effective date of the Separation

Separation Time

   The effective time of the Separation

The spin-off

   The distribution of the remaining Newco common units owned by Danaher on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer if the exchange offer is not fully subscribed.

Tax Matters Agreement

   The Tax Matters Agreement substantially in the form attached as Exhibit A to the Distribution Agreement

Tax Opinion

   The tax opinion of Danaher’s tax counsel, dated as of the closing date of the Mergers

The Transactions

   The Separation, the Distribution, the Mergers and all other transactions, contemplated by the Transaction Documents

Trademark License Agreement

   The Trademark License Agreement substantially in the form attached as Exhibit D to the Distribution Agreement

Transaction Documents

   The Merger Agreement, the Distribution Agreement, the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Trademark License Agreement, the IP License Agreement, the DBS License Agreement, the Lease Agreement and the Voting Agreement

Transition Services Agreement

   The Transition Services Agreement substantially in the form attached as Exhibit B to the Distribution Agreement

 

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Abbreviation/Term

  

Description

Valuation Dates

   The last three trading days of the exchange offer period, as it may be voluntarily extended, but not including the last two trading days that are part of any Mandatory Extension

Voting Agreement

   The Voting Agreement, dated as of October 12, 2014, between Danaher and Anil Singhal

VWAP

   Volume-weighted average price

 

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QUESTIONS AND ANSWERS ABOUT THIS EXCHANGE OFFER AND THE TRANSACTIONS

The following are some of the questions that Danaher stockholders may have, and answers to those questions. These questions and answers, as well as the following summary, are not meant to be a substitute for the information contained in the remainder of this prospectus, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this prospectus. You are urged to read this prospectus in its entirety prior to making any decision.

General Questions and Answers About This Prospectus, The Transactions and Related Timeline

 

Q: What transactions does this prospectus relate to?

 

A: On October 12, 2014, NetScout and Danaher agreed to enter into Transactions to effect the transfer of the Communications Business to NetScout. These Transactions provide for the Separation and the Distribution of the Communications Business and the subsequent mergers of (a) Merger Sub with and into Newco, with Newco surviving as a wholly-owned subsidiary of NetScout and (b) Newco with and into Merger Sub II, with Merger Sub II surviving as a wholly-owned subsidiary of NetScout. In order to effect the Separation, the Distribution and the Mergers, Danaher, Newco, NetScout, Merger Sub and Merger Sub II entered into the Merger Agreement and Danaher, Newco and NetScout entered into the Distribution Agreement. In addition, Danaher, Newco, NetScout and certain of their respective affiliates have entered into, or will enter into, various ancillary agreements in connection with the Transactions. These agreements, which are described in greater detail in this prospectus, govern the relationship among Danaher, Newco, NetScout and their respective affiliates after the Separation, the Distribution and the Mergers.

On the closing date of the Mergers, Danaher will distribute Newco common units to its participating stockholders in an exchange offer. If the exchange offer is consummated but is not fully subscribed, Danaher will distribute the remaining Newco common units on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer. Any Danaher stockholder who validly tenders (and does not properly withdraw) shares of Danaher common stock for Newco common units in the exchange offer will waive, with respect to such shares, their rights to receive, and forfeit any rights to, Newco common units distributed on a pro rata basis to Danaher stockholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of Newco common units not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of NetScout common stock into which the remaining Newco common units will be converted in the First Merger will be transferred to Danaher stockholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

Immediately after the Distribution and on the closing date of the Mergers, Merger Sub will merge with and into Newco, whereby the separate corporate existence of Merger Sub will cease and Newco will continue as the surviving company and as a wholly-owned subsidiary of NetScout. Afterwards, Newco will merge with and into Merger Sub II, whereby the separate corporate existence of Newco will cease and Merger Sub II will continue as the surviving company and as a wholly-owned subsidiary of NetScout. After the Mergers, NetScout will own and operate the Communications Business through Merger Sub II and will also continue its current businesses. All shares of NetScout common stock, including those issued in the First Merger, will be listed on NASDAQ under NetScout’s current trading symbol “NTCT.”

 

Q: What is the Timeline for the Transactions Described Above?

 

A: Below is a step-by-step list illustrating the material events relating to the Separation, the Distribution and the Mergers. Each of these events is discussed in more detail elsewhere in this prospectus.

 

  1.

Step #1—Internal Restructuring; The Separation. Prior to the Distribution and the First Merger, Danaher will convey to Newco or one or more subsidiaries of Danaher certain assets and liabilities

 

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  constituting the Communications Business, and will cause any applicable subsidiary of Danaher to convey to Danaher or its designated subsidiary (other than Newco or any of Newco’s subsidiaries) its certain excluded assets and excluded liabilities in order to separate and consolidate the Communications Business. Immediately thereafter, Danaher will contribute all the equity interests in each such subsidiary of Danaher holding assets and liabilities constituting the Communications Business to Newco in exchange for Newco common units. In addition, certain assets, liabilities and employees of the Communications Business may be transferred directly to NetScout or one or more subsidiaries of NetScout.

 

  2. Step #2—The Distribution—Exchange Offer and Spin-Off. On the closing date of the Mergers, Danaher will distribute 100% of the Newco common units to Danaher stockholders through an exchange offer followed by, in the event the exchange offer is not fully subscribed, a spin-off distribution. In the exchange offer, Danaher will offer its stockholders the option to exchange all or a portion of their shares of Danaher common stock for Newco common units. In the event the exchange offer is not fully subscribed, Danaher will distribute the remaining Newco common units owned by Danaher on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer.

 

  3. Step #3—The Mergers. In the First Merger, Merger Sub will be merged with and into Newco, with Newco surviving as a wholly-owned subsidiary of NetScout. Immediately thereafter, in the Second Merger, Newco will be merged with and into Merger Sub II, with Merger Sub II surviving as a wholly-owned subsidiary of NetScout. In the First Merger, each outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into the right to receive a number of shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger.

 

Q: What are Danaher’s reasons for pursuing the Transactions described in this prospectus?

 

A: In reaching its decision to approve the Merger Agreement, the Distribution Agreement and the Transactions, Danaher’s board of directors considered a wide variety of factors, including the significant factors listed below, as generally supporting its decision:

 

    the value creation expected to result from combining the Communications Business with NetScout, and the ability of pre-First Merger holders of Newco common units and Newco Employees to own approximately 59.5% of NetScout on a fully-diluted basis after giving effect to the Transactions and participate in the future upside of the combined company;

 

    the complementary nature of the product and service offerings of the Communications Business and those of NetScout, the combination of which is expected to enhance the offerings of both companies to customers and solidify the position of the combined company as a premier, global communications and data solutions provider;

 

    the resources of the Communications Business outside of the United States, and the opportunities that such resources will present for NetScout’s operations to expand to other markets as a result of the Transactions;

 

    the expectation that the Separation, the Distribution and the Mergers generally would result in a tax-efficient disposition of the Communications Business for Danaher and Danaher’s stockholders, while a sale of the Communications Business for cash generally would result in a taxable disposition for Danaher;

 

    NetScout’s business prospects and expected synergies after giving effect to the proposed acquisition of the Communications Business;

 

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    the reports of Danaher’s senior management regarding their due diligence review of NetScout’s business; and

 

    the review by the board of directors of the structure and terms of the Merger Agreement, the Distribution Agreement and the Transactions, including the parties’ representations, warranties and covenants, the conditions to their respective obligations and the termination provisions, as well as the likelihood of consummation of the Transactions and the board’s evaluation of the likely time period necessary to close the Transactions.

In the course of its deliberations, the Danaher board of directors also considered a variety of risks and other potentially negative factors as set forth in the section entitled “Danaher’s Reasons for the Transactions.”

 

Q: What are NetScout’s reasons for pursuing the Transactions described in this prospectus?

 

A: The board of directors of NetScout considered the following factors as generally supporting its decision to approve the Merger Agreement and recommend that NetScout stockholders approve the issuance of shares of NetScout common stock in the First Merger:

Advances Strategic Objectives. The acquisition advances NetScout’s strategic objectives of expanding its product portfolio across service assurance and performance analytics, business intelligence and cyber security solutions for communications service providers and large and small enterprises, and government organizations. Consequently, NetScout believes that the acquisition will enhance its ability to create long-term value for its stockholders, including by providing the following benefits:

 

    The acquisition enables NetScout to grow to a combined non-GAAP annual revenue base of more than $1.2 billion with an expanded range of complementary products, which is expected to position NetScout to drive strong revenue growth and improved profitability over the long term. Over the long term, NetScout’s management believes that the combined company will be capable of growing revenue at an approximate compounded annual growth rate of 10 percent.

 

    The acquisition increases NetScout’s addressable market and broadens both its service provider and enterprise customer base. The acquisition significantly expands NetScout’s total addressable market to more than $8 billion. International Data Corporation (“IDC”) estimated that spending on network and application performance management solutions, NetScout’s core market prior to the acquisition, was approximately $5.0 billion in 2013. However, NetScout did not have the requisite offerings to fully address key segments within its core market. The acquisition provides NetScout with new capabilities to fill gaps in its product portfolio and target parts of these markets that were previously not available to NetScout such as radio access network optimization and the low-mid tier of the enterprise network performance management market. Additionally, the acquisition enables NetScout to enter the cyber security market and further enhance its capabilities in the advanced analytics (business intelligence) market, in which such markets global spending was estimated by IDC to be over $3 billion in 2013.

 

    The acquisition of the Tektronix Communications business provides NetScout with broader access to service provider customers.

 

    The acquired portions of the Fluke Networks Enterprise business allow NetScout to expand into serving mid-tier and smaller enterprise customers.

 

    The acquisition of Arbor Networks allows NetScout to immediately enter the cyber intelligence and cyber security market.

 

    NetScout will gain complementary, award-winning technologies, capabilities and offerings that can better position it to deliver high-value products and services.

 

    NetScout will expand its geographical footprint outside of North America.

 

    The combined company is expected to have more than 35% of the workforce composed of research and development personnel.

 

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Cost Synergies. NetScout expects to achieve initial annualized run-rate cost synergies of approximately five percent of the combined cost base, or approximately $45 to $55 million within two years from the consummation of the Transactions as a result of increased size, economies of scale, and elimination of redundancies after the Transactions. NetScout expects to generate additional cost synergies in subsequent years by using common infrastructure platforms, and by eliminating or reducing expenses associated with programs and capabilities already in place as NetScout aligns its go-to-market and related support programs and initiatives. However, the magnitude and timing of such synergies has yet to be determined. NetScout’s initial estimates of cost synergies were based on NetScout’s prior experience in integrating acquired companies and an analysis of the cost base of NetScout and the Communications Business. NetScout anticipates that a significant portion of the initial cost savings will result from improved gross margins due to improved purchasing power, rationalization of consulting and support services, and opportunities for the combined company to sell lower cost of goods sold products. The remainder of the initial cost savings will be realized as a result of operating expense reduction from sales force rationalization and product roadmap integration.

Accretive Transaction. NetScout expects the Transactions to be accretive on a non-GAAP basis in the first full year of operations.

Transaction Terms and Other Considerations. The board of directors of NetScout also considered the other facts about the Transactions and combined company, such as the fixed share nature of the merger consideration, that the Merger Agreement and the consideration to be paid by NetScout were the result of extensive arm’s-length negotiations, that the Transactions would not require NetScout to deplete cash resources or incur debt, the opinion, dated October 12, 2014, of RBC Capital Markets, LLC (“RBC Capital Markets”) to NetScout’s board of directors as to the fairness, from a financial point of view and as of such date, to NetScout of the merger consideration to be paid by NetScout in the First Merger, the modest changes to NetScout’s governance structure and the ability of the board of directors of NetScout, subject to the payment of a termination fee, to withdraw or modify its recommendation to the NetScout stockholders to approve the issuance of the NetScout common stock in the First Merger in certain circumstances.

Questions and Answers About The Exchange Offer

 

Q: Who may participate in this Exchange Offer?

 

A: Any U.S. holders of Danaher common stock during the exchange offer period may participate in this exchange offer. Although Danaher has mailed this prospectus to its stockholders to the extent required by U.S. law, including stockholders located outside the United States, this prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any shares of Danaher common stock, shares of NetScout common stock or Newco common units in any jurisdiction in which such offer, sale or exchange is not permitted.

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of Danaher, NetScout or Newco has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of Danaher common stock, shares of NetScout common stock or Newco common units outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of Danaher common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for Danaher, NetScout or Newco to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

The legal limitations described under this heading could prevent certain holders of Danaher common stock from participating in the exchange offer, which could cause the exchange offer to be undersubscribed.

 

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Non-U.S. stockholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of Danaher common stock, Newco common units or shares of NetScout common stock that may apply in their home countries. None of Danaher, NetScout or Newco can provide any assurance about whether such limitations may exist. See “This Exchange Offer—Certain Matters Relating to Non-U.S. Jurisdictions” for additional information about limitations on the exchange offer outside the United States.

 

Q: How many Newco common units will I receive for each share of Danaher common stock that I tender?

 

A: This exchange offer is designed to permit you to exchange your shares of Danaher common stock for Newco common units at a price per share equal to a 7% discount to the per-share value of NetScout common stock, calculated as set forth in this prospectus. Stated another way, for each $100 of your Danaher common stock accepted in this exchange offer, you will receive approximately $107.53 of Newco common units. The value of the Danaher common stock will be based on the calculated per-share value for the Danaher common stock on the NYSE and the value of the Newco common units will be based on the calculated per-share value for NetScout common stock on NASDAQ, in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates. Please note, however, that:

 

    The number of units you can receive is subject to an upper limit of an aggregate of 2.2522 Newco common units for each share of Danaher common stock accepted in this exchange offer. The next question and answer below describes how this limit may impact the value you receive.

 

    This exchange offer does not provide for a minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.”

 

    Because this exchange offer is subject to proration, Danaher may accept for exchange only a portion of the Danaher common stock tendered by you.

 

Q: Is there a limit on the number of Newco common units I can receive for each share of Danaher common stock that I tender?

 

A: The number of units you can receive is subject to an upper limit of 2.2522 Newco common units for each share of Danaher common stock accepted in this exchange offer. If the upper limit is in effect, you may receive less than $107.53 of Newco common units for each $100 of Danaher common stock that you tender, and you could receive much less. For example, if the calculated per-share value of Danaher common stock was $87.81 (the highest closing price for Danaher common stock on the NYSE during the three-month period prior to commencement of this exchange offer) and the calculated per-unit value of Newco common units was $38.41 (the lowest closing price for NetScout common stock on NASDAQ during that three-month period), the value of Newco common units, based on the NetScout common stock price, received for shares of Danaher common stock accepted for exchange would be approximately $98.52 for each $100 of Danaher common stock accepted for exchange.

The upper limit would represent a 10% discount for Newco common units based on the average of the daily VWAPs of Danaher common stock on the NYSE and NetScout common stock on NASDAQ on May 8, 2015, May 11, 2015 and May 12, 2015 (the last three trading days ending on the second to last trading day prior to commencement of this exchange offer). Danaher set this upper limit to ensure that an unusual or unexpected drop in the trading price of NetScout common stock, relative to the trading price of Danaher common stock, would not result in an unduly high number of Newco common units being exchanged for each share of Danaher common stock accepted in this exchange offer.

 

Q: How and when will I know if the upper limit is in effect?

 

A:

Danaher will announce whether the upper limit on the number of shares that can be received for each share of Danaher common stock tendered will be in effect at the expiration of the exchange offer period, through http://www.danaher.com/netscout and by press release, no later than 4:30 p.m., New York City time, on the

 

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  expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date to permit stockholders to tender or withdraw their Danaher common stock during those days. The daily VWAP and trading prices of Danaher common stock and NetScout common stock during this Mandatory Extension will not, however, affect the upper limit, which will be fixed at 2.2522. See “This Exchange Offer—Terms of this Exchange Offer—Extension; Termination; Amendment—Mandatory Extension.”

 

Q: How are the calculated per-share values of Danaher common stock and NetScout common stock determined for purposes of calculating the number of Newco common units to be received in this exchange offer?

 

A: The calculated per-share value of Danaher common stock and NetScout common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of Danaher common stock on the NYSE and NetScout common stock on NASDAQ, as the case may be, on each of the Valuation Dates. Danaher will determine such calculations of the per-share values of Danaher common stock and NetScout common stock and such determination will be final.

 

Q: What is the “daily volume-weighted average price” or “daily VWAP?”

 

A: The “daily volume-weighted average price” for Danaher common stock and NetScout common stock will be the volume-weighted average price of Danaher common stock on the NYSE and NetScout common stock on NASDAQ during the period beginning at 9:30 a.m., New York City time (or such other time as is the official open of trading on the NYSE and NASDAQ), and ending at 4:00 p.m., New York City time (or such other time as is the official close of trading on the NYSE and NASDAQ), except that such data will only take into account adjustments made to reported trades included by 4:10 p.m., New York City time. The daily VWAP will be as reported by Bloomberg L.P. displayed under the heading Bloomberg VWAP on the Bloomberg pages “DHR UN<Equity>AQR” with respect to Danaher common stock and “NTCT UW<Equity>AQR” with respect to NetScout common stock (or their equivalent successor pages if such pages are not available). The daily VWAPs provided by Bloomberg L.P. may be different from other sources of volume—weighted average prices or investors’ or security holders’ own calculations of volume—weighted average prices.

 

Q: Where can I find the daily VWAP of Danaher common stock and NetScout common stock during the exchange offer period?

 

A: Danaher will maintain a website at http://www.danaher.com/netscout that provides the daily VWAP of both Danaher common stock and NetScout common stock, together with indicative exchange ratios, which will be made available commencing after the close of trading on the third trading day of the exchange offer, for each day during this exchange offer. During the period of the Valuation Dates, when the values of Danaher common stock and NetScout common stock are calculated for the purposes of this exchange offer, the website will show the indicative exchange ratios based on indicative calculated per-share values calculated by Danaher, which will equal (i) on the first Valuation Date, the intra-day VWAP during the elapsed portion of that day, (ii) on the second Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and (iii) on the third Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and with the actual daily VWAP on the second Valuation Date. During this period, the indicative exchange ratios and calculated per-share values will be updated at 10:30 a.m., 1:30 p.m. and no later than 4:30 p.m., New York City time.

 

Q: Why is the calculated per-share value for Newco common units based on the trading prices for NetScout common stock?

 

A:

There is currently no trading market for Newco common units and no such trading market will be established in the future. Danaher believes, however, that the trading prices for NetScout common stock are an appropriate

 

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  proxy for the trading prices of Newco common units because (i) in the First Merger, each outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into the right to receive a number of fully paid and nonassessable shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger, (ii) prior to the consummation of the exchange offer, Newco will authorize the issuance of a number of Newco common units such that the total number of Newco common units outstanding immediately prior to the First Merger will be that number that results in the exchange ratio in the First Merger equaling one and, as a result, each Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into one share of NetScout common stock in the First Merger, and (iii) at the Valuation Dates, it is expected that all the major conditions to the consummation of the First Merger will have been satisfied and the First Merger will be expected to be consummated shortly, such that investors should be expected to be valuing NetScout common stock based on the expected value of such NetScout common stock immediately after the Mergers. There can be no assurance, however, that NetScout common stock after the Mergers will trade on the same basis as NetScout common stock trades prior to the Mergers. See “Risk Factors—Risks Related to the Exchange Offer—The trading prices of NetScout common stock may not be an appropriate proxy for the prices of Newco common units.”

 

Q: How and when will I know the final exchange ratio?

 

A: Subject to the possible Mandatory Extension of this exchange offer described below, the final exchange ratio showing the number of Newco common units that you will receive for each share of Danaher common stock accepted in this exchange offer will be available at http://www.danaher.com/netscout no later than 4:30 p.m., New York City time, on the expiration date and separately announced by press release. In addition, as described below, you may also contact the information agent to obtain these indicative exchange ratios and the final exchange ratio at its toll–free number provided on the back cover of this prospectus. Danaher will announce whether the upper limit on the number of shares that can be received for each share of Danaher common stock tendered is in effect at http://www.danaher.com/netscout and separately by press release, no later than 4:30 p.m., New York City time, on the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date will be made to permit stockholders to tender or withdraw their Danaher common stock during those days.

 

Q: Will indicative exchange ratios be provided during the exchange offer period?

 

A: Yes. Indicative exchange ratios will be available commencing after the close of trading on the third trading day of the exchange offer by contacting the information agent at the toll-free number provided on the back cover of this prospectus and at http://www.danaher.com/netscout on each trading day during the exchange offer period, calculated as though that day were the expiration date of this exchange offer. The indicative exchange ratio will also reflect whether the upper limit on the exchange ratio, described above, would have been in effect. During the period of the Valuation Dates, when the per-share values of Danaher common stock and per-unit values of Newco common units are calculated for the purposes of this exchange offer, the website will show the indicative exchange ratios based on indicative calculated per-share and per-unit values which will equal (i) on the first Valuation Date, the intra-day VWAP during the elapsed portion of that day, (ii) on the second Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and (iii) on the third Valuation Date, the intra-day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and with the actual daily VWAP on the second Valuation Date.

In addition, for purposes of illustration, a table that indicates the number of Newco common units that you would receive per share of Danaher common stock, calculated on the basis described above and taking into

 

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account the upper limit, assuming a range of averages of the daily VWAP of Danaher common stock and NetScout common stock on the Valuation Dates, is provided under “This Exchange Offer—Terms of this Exchange Offer.”

 

Q: What if Danaher common stock or NetScout common stock does not trade on any of the Valuation Dates?

 

A: If a market disruption event occurs with respect to Danaher common stock or NetScout common stock on any of the Valuation Dates, the calculated per-share value of Danaher common stock and per-unit value of Newco common units will be determined using the daily VWAP of shares of Danaher common stock and shares of NetScout common stock on the preceding trading day or days, as the case may be, on which no market disruption event occurred with respect to either Danaher common stock and NetScout common stock. If, however, a market disruption event occurs as specified above, Danaher may terminate or extend this exchange offer if, in its reasonable judgment, the market disruption event has impaired the benefits of this exchange offer to Danaher. For specific information as to what would constitute a market disruption event, see “This Exchange Offer—Conditions for Consummation of this Exchange Offer.”

 

Q: Are there circumstances under which I would receive fewer Newco common units than I would have received if the exchange ratio were determined using the closing prices of Danaher common stock and NetScout common stock on the expiration date of this exchange offer?

 

A: Yes. For example, if the trading price of Danaher common stock were to increase during the period of the Valuation Dates or after the date the exchange ratio is set, the calculated per-share value of Danaher common stock would likely be lower than the closing price of Danaher common stock on the expiration date of this exchange offer. As a result, you may receive fewer Newco common units for each $100 of Danaher common stock than you would have if that per-share value were calculated on the basis of the closing price of Danaher common stock on the expiration date. Similarly, if the trading price of NetScout common stock were to decrease during the period of the Valuation Dates or after the date the exchange ratio is set, the calculated per-unit value of Newco common units would likely be higher than the closing price of NetScout common stock on the expiration date. This could also result in you receiving fewer Newco common units for each $100 of Danaher common stock than you would otherwise receive if that per-unit value were calculated on the basis of the closing price of NetScout common stock on the expiration date of this exchange offer. See “This Exchange Offer—Terms of this Exchange Offer.”

 

Q: Will fractional shares of NetScout common stock be distributed?

 

A: Upon consummation of this exchange offer, the exchange offer agent will hold the Newco common units as agent for the holders of Danaher common stock who validly tendered their shares and, in case of a pro rata distribution, for the holders of record of Danaher common stock for the pro rata spin-off distribution (in the event the exchange offer is not fully subscribed). Immediately following the consummation of this exchange offer, and by means of the First Merger, each outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into the right to receive a number of shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger. In this conversion of Newco common units into shares of NetScout common stock, no fractional shares of NetScout common stock will be delivered to holders of Newco common units. Instead, holders of Newco common units who would otherwise be entitled to receive a fractional share of NetScout common stock (after aggregating all fractional shares of NetScout common stock issuable to such holder) will receive in cash the dollar amount (rounded to the nearest whole cent) determined by multiplying such fraction by the closing price of NetScout common stock on NASDAQ on the last business day prior to the effective time of the First Merger. The amount received by such holders of Newco common units will be net of any required withholding taxes.

 

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Q: What is the aggregate number of Newco common units being offered in this exchange offer?

 

A: In this exchange offer, Danaher is offering to exchange all of the Newco common units held by it. In addition, Newco will authorize the issuance of a number of Newco common units such that the total number of Newco common units immediately prior to the First Merger will be equal to 62.5 million plus the product of 1.46 multiplied by the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger. See “This Exchange Offer—Terms of this Exchange Offer.”

 

Q: What happens if not enough shares of Danaher common stock are tendered to allow Danaher to exchange all of the Newco common units it holds?

 

A: If this exchange offer is consummated but less than all Newco common units are exchanged because this exchange offer is not fully subscribed, the additional Newco common units owned by Danaher will be distributed in the spin-off on a pro rata basis to the holders of shares of Danaher common stock as of the record date. The record date for the spin-off will be formally announced by press release by Danaher. Any Danaher stockholder who validly tenders (and does not properly withdraw) shares of Danaher common stock for Newco common units in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, Newco common units distributed on a pro rata basis to Danaher stockholders in the spin-off in the event the exchange offer is not fully subscribed.

Upon the consummation of this exchange offer prior to the effective time of the First Merger, Danaher will deliver to the exchange offer agent, and the exchange offer agent will hold, for the account of the relevant Danaher stockholders, the global certificate(s) representing all of the Newco common units being distributed in this exchange offer and subsequent spin-off, if any, with instructions to hold the Newco common units as agent for holders of shares of Danaher common stock validly tendered and not withdrawn and holders of shares of Danaher common stock as of the distribution date of a pro rata distribution, if any. The exchange offer agent will calculate the exact number of Newco common units not accepted at the expiration of this exchange offer and to be distributed on a pro rata basis on the date of the spin-off, if any, and that number of Newco common units will be held as agent for the holders of shares of Danaher common stock remaining after the consummation of the exchange offer. See “This Exchange Offer—Distribution of Newco Common Units Remaining After This Exchange Offer.”

 

Q: Will all shares of Danaher common stock that I tender be accepted in this exchange offer?

 

A: Not necessarily. Depending on the number of shares of Danaher common stock validly tendered in this exchange offer and not properly withdrawn, the calculated per-share value of Danaher common stock and the per-unit value of Newco common units determined as described above, Danaher may have to limit the number of shares of Danaher common stock that it accepts in this exchange offer through a proration process. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described under “This Exchange Offer—Terms of this Exchange Offer—Proration; Odd-Lots.”

An exception to proration can apply to stockholders (other than plan participants in the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan) who beneficially own “odd–lots,” that is, fewer than 100 shares of Danaher common stock. Such beneficial holders of Danaher common stock who validly tender all of their shares will not be subject to proration.

In all other cases, proration for each tendering stockholder will be based on (i) the proportion that the total number of shares of Danaher common stock to be accepted bears to the total number of shares of Danaher common stock validly tendered and not properly withdrawn and (ii) the number of shares of Danaher common stock validly tendered and not properly withdrawn by that stockholder (and not on that stockholder’s aggregate ownership of shares of Danaher common stock). Any shares of Danaher common stock not accepted for exchange as a result of proration will be returned to tendering stockholders promptly after the final proration factor is determined.

 

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Q: Will I be able to sell my Newco common units after this exchange offer is completed?

 

A: No. There currently is no trading market for Newco common units and no such trading market will be established in the future.

 

Q: How many shares of Danaher common stock will Danaher accept if this exchange offer is completed?

 

A: The number of shares of Danaher common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio, the number of Newco common units offered and the number of shares of Danaher common stock tendered. Assuming this exchange offer is fully subscribed, the largest possible number of shares of Danaher common stock that will be accepted would equal 62,500,000 (the number of Newco common units being offered in this exchange offer, assuming no adjustment as a result of shares being issued in acquisitions by NetScout between the date of the Merger Agreement and the closing date of the Mergers) divided by the final exchange ratio. For example, assuming that the final exchange ratio is 2.1796 (the current indicative exchange ratio based on the daily VWAPs of Danaher common stock and NetScout common stock on May 8, 2015, May 11, 2015 and May 12, 2015), then Danaher would accept up to a total of approximately 28,674,986 shares of Danaher common stock.

 

Q: Are there any conditions to Danaher’s obligation to complete this exchange offer?

 

A: Yes. This exchange offer is subject to various conditions listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer.” If any of these conditions are not satisfied or waived prior to the expiration of this exchange offer, Danaher will not be required to accept shares for exchange and may extend or terminate this exchange offer.

Danaher may waive any of the conditions to this exchange offer prior to the expiration of this exchange offer. For a description of the material conditions precedent to this exchange offer, including satisfaction or waiver of the conditions to the Transactions, the receipt of NetScout stockholder approval of the issuance of shares of NetScout common stock in connection with the First Merger, and other conditions, see “This Exchange Offer—Conditions for Consummation of this Exchange Offer.” Newco has no right to waive any of the conditions to this exchange offer. NetScout has no right to waive any of the conditions to this exchange offer (other than certain conditions relating to the other transactions).

 

Q: When does this exchange offer expire?

 

A: The period during which you are permitted to tender your shares of Danaher common stock in this exchange offer will expire at 12:00 midnight, New York City time, on July 8, 2015, unless Danaher extends this exchange offer. See “This Exchange Offer—Terms of this Exchange Offer—Extension; Termination; Amendment.”

 

Q: Can this exchange offer be extended and under what circumstances?

 

A: Yes. Subject to its compliance with the Merger Agreement, Danaher can extend this exchange offer, in its sole discretion, at any time and from time to time. For instance, this exchange offer may be extended if any of the conditions for consummation of this exchange offer listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer” are not satisfied or waived prior to the expiration of this exchange offer. In case of an extension of this exchange offer, Danaher will publicly announce the extension by press release no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled expiration date. In addition, if the upper limit on the number of shares that can be received for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date to permit stockholders to tender or withdraw their Danaher common stock during that period.

 

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Q: How do I participate in this exchange offer?

 

A: The procedures you must follow to participate in this exchange offer will depend on whether you hold your shares of Danaher common stock in certificated form, through a bank or trust company or broker, as a participant in the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan, or if your shares of Danaher common stock are held in book-entry via the Direct Registration System (“DRS”). For specific instructions about how to participate, see “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering.”

 

Q: What if I participate in the Danaher Stock Fund through the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan?

 

A: If you hold shares of Danaher common stock in your account under the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan, you can elect to either keep your shares of Danaher common stock or exchange some or all of your shares of Danaher common stock for Newco common units in the exchange offer. You will receive instructions from the applicable plan record keeper via letter or email informing you how to make an election and the deadline for making an election. If you do not make an active election prior to the applicable deadline, none of the shares of Danaher common stock in your account will be exchanged for Newco common units.

For specific instructions about how to tender the shares of Danaher common stock held in your account, see “This Exchange Offer—Terms of This Exchange Offer—Procedures for Tendering.”

If you do not elect to exchange some or all of the shares of Danaher common stock held in your account for Newco common units, you may still receive Newco common units in the spin-off (in the event the exchange offer is not fully subscribed) in respect of the shares of Danaher common stock held in your account. Upon the closing of the Mergers, any Newco common units held in your account will be converted into shares of NetScout common stock.

After the closing of the Mergers, the plan fiduciary responsible for evaluating the propriety of investment options under the applicable plan may conclude that the plan will no longer maintain a NetScout stock fund, in which case you may be required to sell the shares of NetScout common stock held in your account and reallocate the sale proceeds to one or more of the other investment options within the applicable plan.

 

Q: How do I tender my shares of Danaher common stock after the final exchange ratio has been determined?

 

A: If you wish to tender your shares after the final exchange ratio has been determined, you will generally need to do so by means of delivering a notice of guaranteed delivery and complying with the guaranteed delivery procedures described in the section entitled “This Exchange Offer—Terms of this Exchange Offer—Procedures for Tendering—Guaranteed Delivery Procedures.” If you hold shares of Danaher common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must tender your shares on your behalf.

If your shares of Danaher common stock are held through an institution and you wish to tender your Danaher common stock after The Depository Trust Company has closed, the institution must deliver a notice of guaranteed delivery to the exchange offer agent prior to the expiration of the exchange offer at 12:00 midnight, New York City time, on the expiration date of the exchange offer.

 

Q: Can I tender only a portion of my shares of Danaher common stock in this exchange offer?

 

A: Yes. You may tender all, some or none of your shares of Danaher common stock.

 

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Q: What do I do if I want to retain all of my shares of Danaher common stock?

 

A: If you want to retain all of your shares of Danaher common stock, you do not need to take any action. However, after the consummation of the Transactions, the Communications Business will no longer be owned by Danaher, and as a holder of Danaher common stock you will no longer hold shares in a company that owns the Communications Business (unless the exchange offer is consummated but is not fully subscribed and the remaining Newco common units are distributed on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer).

 

Q: Can I change my mind after I tender my shares of Danaher common stock and before the exchange offer expires?

 

A: Yes. You may withdraw your tendered shares at any time before this exchange offer expires. See “This Exchange Offer—Terms of this Exchange Offer—Withdrawal Rights.” If you change your mind again, you can re-tender your shares of Danaher common stock by following the tender procedures again prior to the expiration of this exchange offer.

 

Q: Will I be able to withdraw the shares of Danaher common stock I tender after the final exchange ratio has been determined?

 

A: Yes. The final exchange ratio used to determine the number of Newco common units that you will receive for each share of Danaher common stock accepted in this exchange offer will be announced no later than 4:30 p.m., New York City time, on the expiration date of this exchange offer. You have the right to withdraw shares of Danaher common stock you have tendered at any time before 12:00 midnight, New York City time, on the expiration date. See “This Exchange Offer—Terms of this Exchange Offer.

If the upper limit on the number of Newco common units that can be received for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date will be made to permit you to tender or withdraw your Danaher common stock during those days, either directly or by acting through a broker, dealer, commercial bank, trust company or similar institution on your behalf.

 

Q: How do I withdraw my tendered Danaher common stock after the final exchange ratio has been determined?

 

A: If you are a registered holder of Danaher common stock (which includes persons holding certificated shares and book-entry shares held through DRS) and you wish to withdraw your shares after the final exchange ratio has been determined, then you must deliver a written notice of withdrawal or a facsimile transmission notice of withdrawal to the exchange offer agent prior to 12:00 midnight, New York City time, on the expiration date. The information that must be included in that notice is specified under “This Exchange Offer—Terms of this Exchange Offer—Withdrawal Rights.”

If you hold your shares through a broker, dealer, commercial bank, trust company or similar institution, you should consult that institution on the procedures you must comply with and the time by which such procedures must be completed in order for that institution to provide a written notice of withdrawal or facsimile notice of withdrawal to the exchange offer agent on your behalf before 12:00 midnight, New York City time, on the expiration date. If you hold your shares through such an institution, that institution must deliver the notice of withdrawal with respect to any shares you wish to withdraw. In such a case, as a beneficial owner and not a registered stockholder, you will not be able to provide a notice of withdrawal for such shares directly to the exchange offer agent.

If your shares of Danaher common stock are held through an institution and you wish to withdraw shares of Danaher common stock after The Depository Trust Company has closed, the institution must deliver a written notice of withdrawal to the exchange offer agent prior to 12:00 midnight, New York City time, on

 

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the expiration date, in the form of The Depository Trust Company’s notice of withdrawal and you must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with The Depository Trust Company’s procedures. See “This Exchange Offer—Terms of this Exchange Offer—Withdrawal Rights—Withdrawing Your Shares After the Close of Business on the Expiration Date.”

 

Q: Are there any material differences between the rights of holders of Danaher common stock and NetScout common stock?

 

A: Yes. While each of Danaher and NetScout is a Delaware corporation, each is subject to different organizational documents. Holders of Danaher common stock, whose rights are currently governed by Danaher’s organizational documents, will, with respect to the shares validly tendered and exchanged immediately following this exchange offer, become stockholders of NetScout and their rights will be governed by NetScout’s organizational documents. The material differences between the rights associated with Danaher common stock and NetScout common stock that may affect Danaher stockholders whose shares are accepted for exchange in this exchange offer and who will obtain shares of NetScout common stock in the Mergers, relate to, among other things, classification of the board of directors, removal of directors, taking of stockholder action by written consent, advance notice procedures for stockholder proposals or director nominations, procedures and voting thresholds for amending organizational documents and approval of certain business combinations. For a further discussion of the material differences between the rights of holders of Danaher common stock and NetScout common stock, see the section entitled “Comparison of Rights of Holders of Danaher Common Stock and NetScout Common Stock.” For a more complete description of the characteristics of the combined company’s business, see “Information on NetScout—NetScout’s Business After the Transactions” beginning on page 79.

 

Q: Are there any appraisal rights for holders of shares of Danaher common stock?

 

A: There are no appraisal rights available to holders of shares of Danaher common stock in connection with this exchange offer.

 

Q: What will Danaher do with the shares of Danaher common stock that are tendered, and what is the impact of the exchange offer on Danaher’s share count?

 

A: The shares of Danaher common stock that are tendered in the exchange offer will be held as treasury stock by Danaher. Any shares of Danaher common stock acquired by Danaher in the exchange offer will reduce the total number of shares of Danaher common stock outstanding, although Danaher’s actual number of shares outstanding on a given date reflects a variety of factors such as option exercises.

 

Q: What will happen to any remaining Newco common units owned by Danaher in the spin-off following the consummation of this exchange offer?

 

A:

In the event that this exchange offer is not fully subscribed, any remaining Newco common units owned by Danaher that are not exchanged in this exchange offer will be distributed on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding following the consummation of this exchange offer. Upon the consummation of this exchange offer prior to the effective time of the First Merger, Danaher will deliver to the exchange offer agent, and the exchange offer agent will hold, for the account of the relevant Danaher stockholders, the global certificate(s) representing all of the outstanding Newco common units, pending the consummation of the First Merger. Prior to or at the effective time of the First Merger, NetScout will deposit with the merger exchange agent evidence in book-entry form representing the shares of NetScout common stock issuable in the First Merger. Such shares of NetScout common stock will be delivered promptly following the effectiveness of the First Merger, pursuant to the procedures determined by the exchange offer agent and the merger exchange agent. See “This Exchange Offer—Terms of this Exchange Offer—Exchange of Shares of Danaher Common Stock.” If this exchange offer is terminated by Danaher on or prior to the expiration date of this exchange offer without the exchange

 

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  of shares, but the conditions for consummation of the Transactions have otherwise been satisfied, Danaher intends to distribute all Newco common units owned by Danaher on a pro rata basis to holders of Danaher common stock, with a record date to be announced by Danaher. Such distributed Newco common units will convert to NetScout common stock in the First Merger.

 

Q: If I tender some or all of my shares of Danaher common stock in this exchange offer, will I receive any Newco common units in the spin-off?

 

A: Danaher stockholders who validly tender (and do not properly withdraw) shares of Danaher common stock for Newco common units and whose shares are accepted in this exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, Newco common units distributed on a pro rata basis to Danaher stockholders in the spin-off (in the event the exchange offer is not fully subscribed). However, in the event any tendered shares are not accepted in this exchange offer for any reason, including in the event of proration if the exchange offer is oversubscribed, or you do not tender all of your shares of Danaher common stock, such shares will be entitled to receive Newco common units in the spin-off.

Questions and Answers About the Transactions

 

Q: What are the Transactions described in this prospectus?

 

A: The Transactions are designed to effect the transfer of the Communications Business to NetScout. References to the Transactions are to the Separation, the Distribution, the Mergers and related transactions to be entered into by Danaher, NetScout, Merger Sub, Merger Sub II and Newco, including their respective affiliates, as described under “The Transactions” and elsewhere in this prospectus.

 

Q: What will happen in the Separation?

 

A: Prior to the First Merger, certain subsidiaries of Danaher will undergo an internal restructuring to separate and consolidate the Communications Business under Newco pursuant to the Distribution Agreement by and among Danaher, NetScout and Newco. See “The Transactions—Overview” beginning on page 126 and “The Transactions—The Separation and the Distribution” beginning on page 129.

 

Q: What will happen in the Distribution that occurs prior to the First Merger?

 

A:

Danaher will transfer certain assets and liabilities related to the Communications Business to Newco or one or more subsidiaries of Danaher, and will cause any applicable subsidiary of Danaher to convey to Danaher or its designed subsidiary (other than Newco or any of Newco’s subsidiaries) certain excluded assets and excluded liabilities. Immediately thereafter, Danaher will contribute all the equity interests in each such subsidiary of Danaher holding assets and liabilities constituting the Communications Business to Newco in exchange for a number of common units representing limited liability company interests in Newco, referred to herein as the Newco common units. In addition, certain assets, liabilities and employees of the Communications Business may be transferred directly to NetScout or one or more subsidiaries of NetScout. Danaher will then distribute 100% of the Newco common units to Danaher stockholders through an exchange offer followed by, if the exchange offer is not fully subscribed, a spin-off distribution. In the exchange offer, Danaher will offer its stockholders the option to exchange all or a portion of their shares of Danaher common stock for all of the Newco common units. If the exchange offer is not fully subscribed, Danaher will distribute the remaining Newco common units owned by Danaher on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer. The exchange offer agent will hold, for the account of the relevant Danaher stockholders (including those who validly tendered their shares in the exchange offer and for the holders of record of Danaher common stock for the pro rata spin-off distribution), the global certificate representing all of the Newco common units, pending the First Merger. In accordance with the terms of the Merger Agreement, the Newco common units delivered to the exchange offer agent will be converted into NetScout common stock at the effective time of the First Merger. Accordingly, in lieu of delivering Newco common units to Danaher

 

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  stockholders that are entitled to the Newco common units in the Distribution, the exchange offer agent will distribute to Danaher stockholders shares of NetScout common stock into which the Newco common units will have converted at the time of the First Merger and cash in lieu of fractional shares (if any). See “The Transactions—Overview” beginning on page 126 and “The Transactions—The Separation and the Distribution” beginning on page 129.

 

Q: What will happen in the Mergers?

 

A: Under the Merger Agreement and in accordance with the General Corporation Law of the State of Delaware (“DGCL”) and the Delaware Limited Liability Company Act (“DLLCA”), at the effective time of the First Merger, Merger Sub will merge with and into Newco. As a result of the First Merger, the separate corporate existence of Merger Sub will terminate and Newco will continue as the surviving company and as a wholly-owned subsidiary of NetScout and will succeed to and assume all the rights, powers and privileges and be subject to all of the obligations of Merger Sub in accordance with the DGCL and the DLLCA. Immediately following the First Merger, Newco will merge with and into Merger Sub II. As a result of the Second Merger, the separate corporate existence of Newco will terminate and Merger Sub II will continue as the surviving company and as a wholly-owned subsidiary of NetScout and will succeed to and assume all the rights, powers and privileges and be subject to all of the obligations of Newco in accordance with the DLLCA.

The Merger Agreement provides that, at the effective time of the First Merger, each issued and outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be automatically converted into a number of shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition by NetScout prior to the effective time of the First Merger divided by (y) the aggregate number of Newco common units issued and outstanding immediately prior to the effective time of the First Merger. Prior to the consummation of the exchange offer, Newco will authorize the issuance of a number of Newco common units such that the total number of Newco common units outstanding immediately prior to the First Merger will be that number that results in the exchange ratio in the First Merger equaling one and, as a result, each Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into one share of NetScout common stock in the First Merger. The calculation of the merger consideration as set forth in the Merger Agreement is expected to result, prior to the elimination of fractional shares, in pre-First Merger holders of Newco common units and Newco Employees collectively holding approximately 59.5% of the outstanding equity interests of NetScout on a fully-diluted basis upon completion of the Transactions and NetScout’s equityholders immediately prior to the First Merger collectively holding approximately 40.5% of such equity interests on a fully-diluted basis.

No fractional shares of NetScout common stock will be issued pursuant to the First Merger. Any holder of Newco common units who would otherwise be entitled to receive a fraction of a share of NetScout common stock (after aggregating all fractional shares issuable to such holder) shall, in lieu of such fraction of a share, be paid in cash the dollar amount (rounded to the nearest whole cent), after deducting any required withholding taxes, on a pro rata basis, without interest, determined by multiplying such fraction by the closing price of a share of NetScout common stock on NASDAQ on the last business day prior to the closing of the First Merger.

See “The Transactions—The Mergers” beginning on page 130 and “The Transactions—Calculation of the Merger Consideration” beginning on page 131.

 

Q: Why will the ownership of NetScout following the Transactions between Danaher equityholders and existing NetScout equityholders be approximately 59.5% and 40.5% on a fully-diluted basis, respectively?

 

A:

It is expected that upon completion of the Transactions, pre-First Merger holders of Newco common units and Newco Employees will hold approximately 59.5% of NetScout’s common stock on a fully-diluted basis and NetScout’s existing equityholders will hold approximately 40.5% of NetScout’s common stock on a

 

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  fully-diluted basis (subject to adjustment in limited circumstances as provided in the Merger Agreement). The ownership of NetScout following the First Merger was the result of a negotiated value exchange between Danaher and NetScout, which was based upon each party’s valuations, prior to the First Merger, of NetScout and the Communications Business. The proposed Transactions are structured as a Reverse Morris Trust acquisition, which is intended to allow a parent company (here, Danaher) to distribute a subsidiary or a business (here, Newco and the Communications Business) in a tax-efficient manner. The first step of such a transaction is the distribution through a dividend (a “spin-off”), exchange (a “split-off”) or a combination of a spin-off and split-off of the subsidiary stock to or with the parent company stockholders that is intended to qualify under Section 355 of the Code. The distributed subsidiary then merges with the acquiring third party (here, Merger Sub, a wholly-owned subsidiary of NetScout) in a reorganization that is intended to qualify under Section 368 of the Code. Such a transaction can qualify as tax-free for U.S. federal income tax purposes for the parent company, its stockholders and the acquiring third party’s stockholders if the transaction structure meets all applicable requirements, including that the parent company stockholders own more than 50% of the stock of the combined entity immediately after the merger. Therefore, in order to meet all applicable requirements of the Code, Danaher stockholders must own more than 50% of the NetScout common stock outstanding immediately following the First Merger.

 

Q: What will Danaher stockholders receive in the Transactions?

 

A: In the exchange offer, Danaher will offer to Danaher stockholders the right to exchange all or a portion of their shares of Danaher common stock for Newco common units. In the event the exchange offer is not fully subscribed, Danaher will distribute in the spin-off the remaining Newco common units owned by Danaher on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after the consummation of the exchange offer. In the First Merger, the Newco common units will be converted into the right to receive NetScout common stock. Thus, each Danaher stockholder will ultimately receive shares of NetScout common stock in the Distribution and the First Merger. Danaher stockholders will not be required to pay for the Newco common units distributed in the spin-off or the shares of NetScout common stock issued in the First Merger. Danaher stockholders will receive cash from the exchange offer agent in lieu of any fractional shares of NetScout common stock to which such stockholders would otherwise be entitled. All shares of NetScout common stock issued in the First Merger will be issued in book entry form. Calculated based on the closing price on NASDAQ of NetScout common stock as of May 1, 2015, the shares of NetScout common stock that NetScout expects to issue to Danaher stockholders as a result of the Transactions would have had a market value of approximately $2.7 billion in the aggregate (the actual value will not be known until the closing date of the Mergers). For more information, see “The Transactions—The Separation and the Distribution” beginning on page 129, “The Transactions—The Mergers” beginning on page 130 and “The Transactions—Calculation of the Merger Consideration” beginning on page 131.

 

Q: Are there any conditions to the consummation of the Transactions?

 

A: Yes. Consummation of the Transactions is subject to a number of conditions, including:

 

    the approval of NetScout’s stockholders of the issuance of shares of NetScout common stock in the First Merger;

 

    the receipt by Danaher of the IRS ruling (which IRS ruling has been received);

 

    the receipt by Danaher of the Tax Opinion;

 

    the completion of the various transaction steps contemplated by the Merger Agreement and the Distribution Agreement, including the Separation and the Distribution;

 

    termination of any waiting period applicable to the Mergers under applicable antitrust or competition laws in the United States (which waiting period has been effectively terminated);

 

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    the absence of any Material Adverse Effect (as this term is described in the section of this prospectus entitled “The Merger Agreement—Representations and Warranties”) with respect to NetScout or the Newco Companies; and

 

    other customary conditions.

If NetScout waives the satisfaction of a material condition to the consummation of the Transactions, NetScout will evaluate the appropriate facts and circumstances at that time and resolicit stockholder approval of the issuance of shares of NetScout common stock in the First Merger if required to do so by law.

This prospectus describes these conditions in more detail under “The Merger Agreement—Conditions to the Merger.”

 

Q: Are there possible adverse effects on the value of NetScout common stock to be received by Danaher stockholders who participate in the exchange offer?

 

A: Danaher stockholders that participate in the exchange offer will be exchanging their shares of Danaher common stock for Newco common units at a discount to the per-share value of NetScout common stock, subject to the upper limit. The existence of a discount, along with the issuance of shares of NetScout common stock pursuant to the First Merger, may negatively affect the market price of NetScout common stock. NetScout also expects to incur significant one-time costs in connection with the Transactions, including advisory, legal, accounting and other professional fees related to the Transactions, transition and integration expenses, such as consulting professionals’ fees, information technology implementation costs and relocation costs, that NetScout management believes are necessary to realize anticipated annualized cost synergies. The incurrence of these costs may have an adverse impact on NetScout’s liquidity or operating results in the periods in which they are incurred. Finally, NetScout will be required to devote a significant amount of time and attention to the process of integrating the operations of NetScout and the Communications Business. If NetScout is not able to effectively manage the process, NetScout’s business could suffer and its stock price may decline. In addition, the market price of NetScout common stock could decline as a result of sales of a large number of shares of NetScout common stock in the market after the consummation of the Transactions or even the perception that these sales could occur. See “Risk Factors” for a further discussion of the material risks associated with the Transactions.

 

Q: What is NetScout’s dividend policy?

 

A: NetScout currently intends to retain its future earnings, if any, to finance the development and expansion of its business and is limited in its ability to pay cash dividends under the terms of its current credit facility. Therefore, NetScout does not intend to pay cash dividends on its common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of NetScout’s board of directors and will depend on NetScout’s financial condition, results of operations and capital requirements, restrictions contained in any financing instruments and such other factors as the NetScout board of directors deems relevant.

 

Q: Will the Separation, the Distribution or the Mergers affect the Danaher equity awards held by employees of the Communications Business who become employees of Newco?

 

A:

Yes. Certain employees of the Communications Business who will become employees of Newco hold options or restricted stock units relating to shares of Danaher common stock. The specific treatment of these awards depends on whether they are vested or scheduled to vest on or before August 4, 2015, or whether they are not scheduled to vest until after August 4, 2015. Each stock option that is held by an employee of the Communications Business who becomes an employee of Newco and is vested and exercisable immediately before the closing of the Mergers or is scheduled to vest on or before August 4, 2015, will generally remain outstanding for 90 days following the later of the closing date of the Mergers or the date the option becomes vested and exercisable. Each restricted stock unit that is held by an employee of the Communications Business who becomes an employee of Newco and is unvested immediately before the

 

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  closing of the Mergers, but is scheduled to vest on or before August 4, 2015, will continue to vest and be settled in accordance with its terms. Each of these stock options and restricted stock units may be equitably adjusted if determined by the Danaher board of directors to be necessary to reflect the impact of the proposed Transactions on the value of shares of Danaher common stock in the manner described in the following Q&A. Danaher does not believe that any adjustments will be made in the event that the exchange offer is fully subscribed. Conversely, any stock options and restricted stock units that are held by an employee of the Communications Business who becomes an employee of Newco and are not vested immediately before the closing of the Mergers or scheduled to vest on or prior to August 4, 2015, will generally be cancelled by Danaher immediately before the closing of the Mergers and replaced by NetScout with a cash retention award and restricted stock units relating to shares of NetScout common stock; provided, however, that if there are adverse tax consequences or compliance issues with this treatment, different treatment may apply as agreed between Danaher and NetScout.

For a more complete description of the treatment of equity awards held by Danaher employees who become employees of Newco, see “Other Agreements—Employee Matters Agreement—Treatment of Danaher Equity Incentive Awards” beginning on page 188.

 

Q: Will the Separation, the Distribution or the Mergers affect the Danaher equity awards held by former employees of Danaher and by current employees of Danaher who do not become employees of Newco?

 

A: Certain former employees of Danaher and current employees of Danaher who will not become employees of Newco hold options and restricted stock units relating to shares of Danaher common stock. The number and the exercise price of stock options held by former employees of Danaher and by current employees of Danaher who do not become employees of Newco may be adjusted if determined by the Danaher board of directors to be necessary so that there is no change by reason of the proposed Transactions to the intrinsic value of the options (the excess of the fair market value of the underlying shares of Danaher common stock over the option’s aggregate exercise price) or the ratio of the aggregate exercise price to the fair market value of the underlying shares of Danaher common stock, and the number of restricted stock units held by these employees may be similarly adjusted to the extent necessary so that there is no change by reason of the proposed Transactions to the aggregate fair market value of the restricted stock units. In addition, any performance based vesting conditions applicable to the restricted stock units may be adjusted if determined by the Danaher board of directors to be necessary to reflect the proposed Transactions.

 

Q: What are the material U.S. federal income tax consequences to Danaher stockholders resulting from the Distribution and the Mergers?

 

A: Danaher will receive the Tax Opinion from Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), to the effect that the Distribution will qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code and that the Mergers will qualify as a tax-free transaction under Section 368(a)(1)(A) of the Code. Assuming the Distribution and the Mergers so qualify, for U.S. federal income tax purposes, no gain or loss will be recognized by a holder of Danaher common stock upon the receipt of Newco common units pursuant to the exchange offer or spin-off (in the event the exchange offer is not fully subscribed) or upon the exchange of Newco common units for NetScout common stock pursuant to the First Merger, other than with respect to cash received in lieu of fractional shares of NetScout common stock in the First Merger.

Please see “Material U.S. Federal Income Tax Consequences of the Transactions” for more information regarding the potential tax consequences of the Transactions.

 

Q: What are the material U.S. federal income tax consequences to NetScout and NetScout’s stockholders resulting from the Transactions?

 

A:

NetScout will not recognize any gain or loss for U.S. federal income tax purposes as a result of the Mergers. Because NetScout stockholders will not participate in the Distribution or the Mergers, NetScout stockholders will generally not recognize gain or loss upon either the Distribution (including this exchange

 

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  offer) or the Mergers. NetScout stockholders should consult their own tax advisors for a full understanding of the tax consequences to them of the Distribution and the Mergers.

 

Q: Are there risks associated with the Transactions?

 

A: Yes. The material risks and uncertainties associated with the Transactions are discussed in the section entitled “Risk Factors” beginning on page 49 and the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 59. Those risks include, among others, the possibility that NetScout may fail to realize the anticipated benefits of the Mergers, the uncertainty that NetScout will be able to integrate the Communications Business successfully, the possibility that NetScout may be unable to provide benefits and services or access to equivalent financial strength and resources to the Communications Business that historically have been provided by Danaher, and the substantial dilution to the ownership interest of current NetScout stockholders following the consummation of the Mergers.

 

Q: Who will serve on the NetScout board of directors following completion of the Mergers?

 

A: Those directors of NetScout serving on its board of directors immediately before the effective time of the First Merger are expected to continue to serve as directors of NetScout immediately following the closing of the Mergers. In addition, as of immediately following the effective time of the First Merger, NetScout will increase the size of its board of directors by one member, and one individual selected by Danaher (which individual is currently anticipated by NetScout and Danaher to be James A. Lico, Danaher’s Executive Vice President) will be appointed to fill the vacancy and will, subject to the fiduciary duties of NetScout’s board of directors, be nominated for re-election at the expiration of such director’s initial term. However, if Danaher’s designated director: (i) is unwilling or unable to serve at the effective time of the First Merger; (ii) is unwilling or unable to serve when such new term starts; or (iii) is not nominated to serve such new term, then Danaher will designate a replacement, acceptable to NetScout in its sole discretion, for such director before the effective time of the First Merger or the start of such new term, as applicable.

 

Q: Will NetScout’s current senior management team manage the business of NetScout after the Transactions?

 

A: Yes. It is expected that NetScout’s current management team will remain intact for the combined business, but may be augmented with new management team members from Danaher. The executive officers of NetScout immediately prior to the closing of the Mergers are expected to remain executive officers of NetScout immediately following the closing of the Mergers. The Merger Agreement provides that NetScout and Newco will take all necessary action to appoint certain specified individuals to management and/or executive officer positions at NetScout or Newco as of the effective time of the Mergers.

 

Q: What stockholder approvals are needed in connection with the Transactions?

 

A: NetScout cannot complete the Transactions unless the proposal relating to the issuance of shares of NetScout common stock in the First Merger is approved by the affirmative vote of a majority of the shares of NetScout common stock represented and voting at the special meeting, either in person or by proxy (assuming a quorum is present). NetScout has scheduled a special meeting of stockholders on June 25, 2015 to approve the issuance of shares of NetScout common stock in the First Merger. Anil K. Singhal, NetScout’s Chief Executive Officer, has agreed with Danaher to vote the shares of NetScout common stock that he owns, representing approximately 5.5% of the outstanding shares of NetScout common stock as of May 1, 2015, the record date for the NetScout special meeting, in favor of the issuance of shares of NetScout common stock. In addition, Danaher intends to vote the shares of NetScout common stock that Danaher owns, representing approximately 2.9% of the outstanding shares of NetScout common stock as of May 1, 2015, in favor of the issuance of shares of NetScout common stock in the First Merger. No vote of Danaher stockholders is required or being sought in connection with the Transactions.

 

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Q: Where will the NetScout shares issued in connection with the Mergers be listed?

 

A: NetScout common stock is listed on NASDAQ under “NTCT.” After consummation of the Transactions, all shares of NetScout common stock issued in the Mergers, and all other outstanding shares of NetScout common stock, will continue to be listed on NASDAQ.

 

Q: What is the current relationship between Newco and NetScout?

 

A: Newco is currently a wholly-owned subsidiary of Danaher and was formed as a Delaware limited liability company in September 29, 2014 to effectuate the Separation, the Distribution and the Mergers. Other than in connection with the Transactions, there is no relationship between Newco and NetScout.

 

Q: When will the Transactions be completed?

 

A: NetScout and Danaher are working to complete the Mergers as quickly as possible after satisfaction of the closing conditions, including consummation of certain transactions contemplated by the Merger Agreement and the Distribution Agreement (such as the Separation) and receipt of NetScout stockholder approval for the issuance of shares of NetScout common stock in the First Merger. In addition, other important conditions to the closing of the Separation and the Mergers exist, including, among other things, the completion of the internal restructuring necessary to separate Danaher’s communications assets and liabilities from Danaher’s other business, and the receipt of the Tax Opinion. NetScout and Danaher anticipate that the transfer of certain assets and liabilities of the Communications Business will be completed after the closing date of the Mergers due to regulatory and other delays in certain jurisdictions outside the United States. It is possible that factors outside NetScout’s and Danaher’s control could require Danaher to complete the Separation and the Distribution and NetScout and Danaher to complete the Mergers at a later time or not complete them at all. For a discussion of the conditions to the Separation and the Mergers, see “The Transactions—Regulatory Approvals” beginning on page 159, “The Merger Agreement—Conditions to the Merger” beginning on page 175, and “The Distribution Agreement—Conditions to the Separation” beginning on page 184.

 

Q: When is the termination date of the Merger Agreement?

 

A: Subject to specified qualifications and exceptions, either Danaher or NetScout may terminate the Merger Agreement at any time prior to the consummation of the First Merger if the First Merger has not been consummated by October 12, 2015.

 

Q: Who can answer my questions about the Transactions or the exchange offer?

 

A: If you have any questions about the Transactions or the exchange offer or you would like to request additional documents, including copies of this prospectus and the letter of transmittal (including the instructions thereto), please contact the information agent, Georgeson Inc., located at 480 Washington Boulevard, 26th Floor, Jersey City, NJ, 07310, at the telephone number (866) 295-3782 or at the email address danaherexchange@georgeson.com.

 

Q: Who is the transfer agent for NetScout common stock and the exchange offer agent for the Distribution?

 

A: Computershare Trust Company, N.A. (“Computershare”) is the transfer agent for NetScout common stock. Computershare is expected to be the merger exchange agent and the exchange offer agent for the Distribution.

 

Q: Where can I find more information about Danaher, NetScout, Newco and the Transactions?

 

A: You can find out more information about Danaher, NetScout, Newco and the Transactions by reading this prospectus and, with respect to Danaher and NetScout, from various sources described in “Where You Can Find More Information; Incorporation By Reference” beginning on page 216.

 

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SUMMARY

The following summary contains certain information described in more detail elsewhere in this prospectus. It does not contain all the details concerning the Transactions, including information that may be important to you. To better understand the Transactions, you should carefully review this entire document and the documents it refers to. See “Where You Can Find More Information; Incorporation by Reference.”

The Companies

NetScout Systems, Inc.

NetScout Systems, Inc.

310 Littleton Road

Westford, Massachusetts 01886

Telephone: (978) 614-4000

NetScout was founded in 1984 and is headquartered in Westford, Massachusetts. NetScout is an industry leader for advanced network, application and service assurance solutions, providing high-quality performance analytics and operational intelligence solutions that facilitate the evolution toward new computing paradigms, including virtualization, mobility and cloud. NetScout designs, develops, manufactures, markets, licenses, sells and supports products focused on assuring service delivery quality, performance and availability for some of the world’s largest, most demanding and complex internet protocol (IP) based service delivery environments. NetScout manufactures and markets these products in integrated hardware and software solutions that are used by commercial enterprises, large governmental agencies and telecommunication service providers worldwide.

RS Merger Sub I, Inc.

RS Merger Sub I, Inc.

c/o NetScout Systems, Inc.

310 Littleton Road

Westford, Massachusetts 01886

Telephone: (978) 614-4000

RS Merger Sub I, Inc., a Delaware corporation referred to in this prospectus as Merger Sub, is a newly formed, direct wholly-owned subsidiary of NetScout that was organized specifically for the purpose of completing the Mergers. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and in connection with the Transactions.

RS Merger Sub II, LLC

RS Merger Sub II, LLC

c/o NetScout Systems, Inc.

310 Littleton Road

Westford, Massachusetts 01886

Telephone: (978) 614-4000

RS Merger Sub II, LLC, a Delaware limited liability company referred to in this prospectus as Merger Sub II, is a newly formed, direct wholly-owned subsidiary of NetScout that was organized specifically for the purpose of completing the Mergers. Merger Sub II has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and in connection with the Transactions.

 

 

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Danaher Corporation

Danaher Corporation

2200 Pennsylvania Ave., NW – Suite 800W

Washington, DC 20037-1701

Telephone: (202) 828-0850

Danaher Corporation, referred to as Danaher, designs, manufactures and markets professional, medical, industrial and commercial products and services, which are typically characterized by strong brand names, innovative technology and major market positions. Danaher’s research and development, manufacturing, sales, distribution, service and administrative facilities are located in more than 50 countries. For the 2014 fiscal year, Danaher had sales of over $19.91 billion and approximately 71,000 employees employed globally. Danaher operates its business in five segments: Test & Measurement, Environmental, Life Sciences & Diagnostics, Dental and Industrial Technologies. For more information on Danaher, see “Information on Danaher.”

Potomac Holding LLC

Potomac Holding LLC

c/o Danaher Corporation

2200 Pennsylvania Ave., NW – Suite 800W

Washington, DC 20037-1701

Telephone: (202) 828-0850

Potomac Holding LLC, a Delaware limited liability company referred to in this prospectus as Newco, is a newly formed, direct wholly-owned subsidiary of Danaher that was organized specifically for the purpose of effecting the Separation. Newco has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the Transactions.

Newco is a holding company. In the Transactions, Danaher will transfer the assets and liabilities related to the Communications Business, including certain subsidiaries of Danaher, to Newco. In exchange therefor, Danaher will receive all the issued and outstanding Newco common units. The Communications Business is the communications group business of Danaher conducted under the brands Tektronix Communications, Fluke Networks and Arbor Networks, and including Newco and its subsidiaries; provided, however, that the Communications Business excludes Danaher’s data communications cable installation business and its communication service provider (field and test tools systems) business. For the fiscal year ended December 31, 2014, the Communications Business generated total sales of $760,223,000 and net earnings of $42,552,000.

The Transactions

On October 12, 2014, NetScout and Danaher agreed to enter into Transactions to effect the transfer of the Communications Business to NetScout. These Transactions provide for the Separation and the Distribution of the Communications Business and the subsequent mergers of (a) Merger Sub with and into Newco, with Newco surviving as a wholly-owned subsidiary of NetScout and (b) Newco with and into Merger Sub II, with Merger Sub II surviving as a wholly-owned subsidiary of NetScout. In order to effect the Separation, the Distribution and the Mergers, Danaher, Newco, NetScout, Merger Sub and Merger Sub II entered into the Merger Agreement and Danaher, Newco and NetScout entered into the Distribution Agreement. In addition, Danaher, Newco, NetScout and certain of their respective affiliates have entered into, or will enter into, various ancillary agreements in connection with the Transactions. These agreements, which are described in greater detail in this prospectus, govern the relationship among Danaher, Newco, NetScout and their respective affiliates after the Separation, the Distribution and the Mergers.

 

 

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On the closing date of the Mergers, Danaher will distribute Newco common units to its participating stockholders in an exchange offer. If the exchange offer is consummated but is not fully subscribed, Danaher will distribute the remaining Newco common units on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer. Any Danaher stockholder who validly tenders (and does not properly withdraw) shares of Danaher common stock for Newco common units in the exchange offer will waive, with respect to such shares, their rights to receive, and forfeit any rights to, Newco common units distributed on a pro rata basis to Danaher stockholders in the event the exchange offer is not fully subscribed. If there is a pro rata distribution, the exchange agent will calculate the exact number of Newco common units not exchanged in the exchange offer and to be distributed on a pro rata basis, and the number of shares of NetScout common stock into which the remaining Newco common units will be converted in the First Merger will be transferred to Danaher stockholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

Immediately after the Distribution and on the closing date of the Mergers, Merger Sub will merge with and into Newco, whereby the separate corporate existence of Merger Sub will cease and Newco will continue as the surviving company and as a wholly-owned subsidiary of NetScout. Afterwards, Newco will merge with and into Merger Sub II, whereby the separate corporate existence of Newco will cease and Merger Sub II will continue as the surviving company and as a wholly-owned subsidiary of NetScout. After the Mergers, NetScout will own and operate the Communications Business through Merger Sub II and will also continue its current businesses. All shares of NetScout common stock, including those issued in the First Merger, will be listed on NASDAQ under NetScout’s current trading symbol “NTCT.”

Transaction Timeline

Below is a step-by-step list illustrating the material events relating to the Separation, the Distribution and the Mergers. Each of these events is discussed in more detail elsewhere in this prospectus.

Step #1—Internal Restructuring; The Separation. Prior to the Distribution and the First Merger, Danaher will convey to Newco or one or more subsidiaries of Danaher certain assets and liabilities constituting the Communications Business, and will cause any applicable subsidiary of Danaher to convey to Danaher or its designated subsidiary (other than Newco or any of Newco’s subsidiaries) certain excluded assets and excluded liabilities in order to separate and consolidate the Communications Business. Immediately thereafter, Danaher will contribute all the equity interests in each such subsidiary of Danaher holding assets and liabilities constituting the Communications Business to Newco in exchange for Newco common units. In addition, certain assets, liabilities and employees of the Communications Business may be transferred directly to NetScout or one or more subsidiaries of NetScout.

Step #2—The Distribution; Exchange Offer and Spin-Off. On the closing date of the Mergers, Danaher will distribute 100% of the Newco common units to Danaher stockholders through an exchange offer followed by, in the event the exchange offer is not fully subscribed, a spin-off distribution. In the exchange offer, Danaher will offer its stockholders the option to exchange all or a portion of their shares of Danaher common stock for Newco common units. In the event the exchange offer is not fully subscribed, Danaher will distribute the remaining Newco common units owned by Danaher on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer.

Step #3—The Mergers. In the First Merger, Merger Sub will be merged with and into Newco, with Newco surviving as a wholly-owned subsidiary of NetScout. Immediately thereafter, in the Second Merger, Newco will be merged with and into Merger Sub II, with Merger Sub II surviving as a wholly-owned subsidiary of NetScout. In the First Merger, each outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into the right to receive a number of shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46

 

 

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multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger.

Set forth below are diagrams that graphically illustrate, in simplified form, the existing corporate structure, the corporate structure immediately following the Separation and Distribution but before the First Merger, the corporate structure immediately following the consummation of the First Merger, and the corporate structure immediately following the consummation of the Second Merger.

 

LOGO

 

LOGO

 

 

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LOGO

 

LOGO

The Separation and the Distribution

Prior to the Distribution and the First Merger, Danaher will convey to Newco or one or more subsidiaries of Danaher certain assets and liabilities constituting the Communications Business, and will cause any applicable subsidiary of Danaher to convey to Danaher or its designated subsidiary (other than Newco or any of Newco’s subsidiaries) certain excluded assets and excluded liabilities, in order to separate and consolidate the Communications Business. Immediately thereafter, Danaher will contribute all the equity interests in each such subsidiary of Danaher holding assets and liabilities constituting the Communications Business to Newco in exchange for Newco common

 

 

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units. In addition, certain assets, liabilities and employees of the Communications Business may be transferred directly to NetScout or one or more subsidiaries of NetScout.

NetScout and Danaher anticipate that the transfer of certain assets and liabilities of the Communications Business will be completed after the closing date of the Mergers due to regulatory and other delays in certain jurisdictions outside the United States.

On the closing date of the Mergers, Danaher will distribute 100% of the Newco common units to Danaher stockholders through an exchange offer followed by, in the event the exchange offer is not fully subscribed, a spin-off distribution. In the exchange offer, Danaher will offer its stockholders the option to exchange all or a portion of their shares of Danaher common stock for Newco common units. In the event the exchange offer is not fully subscribed, Danaher will distribute the remaining Newco common units owned by Danaher on a pro rata basis to Danaher stockholders whose shares of Danaher common stock remain outstanding after consummation of the exchange offer.

Any Danaher stockholder who validly tenders (and does not properly withdraw) shares of Danaher common stock for Newco common units and whose shares are accepted in the exchange offer upon the expiration of this exchange offer will waive, with respect to such shares, their rights to receive, and forfeit any rights to, Newco common units distributed on a pro rata basis to Danaher stockholders in the spin-off (in the event the exchange offer is not fully subscribed). In the spin-off, the exchange offer agent will calculate the exact number of Newco common units owned by Danaher that will not be exchanged in the exchange offer. Such remaining Newco common units will be distributed on a pro rata basis, and the number of shares of NetScout common stock into which the remaining Newco common units will be converted in the First Merger will be transferred to the relevant Danaher stockholders (after giving effect to the consummation of the exchange offer) as promptly as practicable thereafter.

The exchange offer agent will hold, for the account of the relevant Danaher stockholders, the global certificate(s) representing all of the outstanding Newco common units pending the consummation of the First Merger. Newco common units will not be traded during this period.

The Mergers; Merger Consideration

Under the Merger Agreement and in accordance with the DGCL and the DLLCA, at the effective time of the First Merger, Merger Sub will merge with and into Newco. As a result of the First Merger, the separate corporate existence of Merger Sub will terminate and Newco will continue as the surviving company and as a wholly-owned subsidiary of NetScout and will succeed to and assume all the rights, powers and privileges and be subject to all of the obligations of Merger Sub in accordance with the DGCL and the DLLCA. The certificate of formation and the limited liability company operating agreement of Newco in effect immediately prior to the First Merger will be amended and restated in their entirety following the consummation of the First Merger. Immediately following the First Merger, Newco will merge with and into Merger Sub II. As a result of the Second Merger, the separate corporate existence of Newco will terminate and Merger Sub II will continue as the surviving company and as a wholly-owned subsidiary of NetScout and will succeed to and assume all the rights, powers and privileges and be subject to all of the obligations of Newco in accordance with the DLLCA.

The Merger Agreement provides that, at the effective time of the First Merger, each issued and outstanding Newco common unit (except Newco common units held by Danaher, NetScout, Merger Sub or Newco) will be automatically converted into a number of shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition by NetScout prior to the effective time of the First Merger divided by (y) the aggregate number of Newco common units issued and outstanding immediately prior to the effective time

 

 

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of the First Merger. Prior to the consummation of the exchange offer, Newco will authorize the issuance of a number of Newco common units such that the total number of Newco common units outstanding immediately prior to the First Merger will be that number that results in the exchange ratio in the First Merger equaling one and, as a result, each Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into one share of NetScout common stock in the First Merger. The calculation of the merger consideration as set forth in the Merger Agreement is expected to result, prior to the elimination of fractional shares, in pre-First Merger holders of Newco common units and Newco Employees collectively holding approximately 59.5% of the outstanding equity interests of NetScout on a fully-diluted basis upon completion of the Transactions and NetScout’s equityholders immediately prior to the First Merger collectively holding approximately 40.5% of such equity interests on a fully-diluted basis.

No fractional shares of NetScout common stock will be issued pursuant to the First Merger. Any holder of Newco common units who would otherwise be entitled to receive a fraction of a share of NetScout common stock (after aggregating all fractional shares issuable to such holder) shall, in lieu of such fraction of a share, be paid in cash the dollar amount (rounded to the nearest whole cent), after deducting any required withholding taxes, on a pro rata basis, without interest, determined by multiplying such fraction by the closing price of a share of NetScout common stock on NASDAQ on the last business day prior to the closing of the First Merger.

Terms of this Exchange Offer

Danaher is offering holders of shares of Danaher common stock the opportunity to exchange their shares for Newco common units. You may tender all, some or none of your shares of Danaher common stock. This prospectus and related documents are being sent to persons who directly held shares of Danaher common stock on May 13, 2015 and brokers, banks and similar persons whose names or the names of whose nominees appear on Danaher’s stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of Danaher’s common stock.

Danaher common stock validly tendered and not properly withdrawn will be accepted for exchange at the exchange ratio determined as described under “This Exchange Offer—Terms of this Exchange Offer,” on the terms and conditions of this exchange offer and subject to the limitations described below, including the proration provisions.

Danaher will promptly return any shares of Danaher common stock that are not accepted for exchange following the expiration of this exchange offer and the determination of the final proration factor, if any, described below. After the expiration of this exchange offer, shares accepted by Danaher may not be withdrawn; provided, however, that such shares may be withdrawn at any time after the expiration of 40 business days from the commencement of this exchange offer if this exchange offer has not then been consummated.

For the purposes of illustration, the table below indicates the number of Newco common units that you would receive per share of Danaher common stock you validly tender, calculated on the basis described under “This Exchange Offer—Terms of this Exchange Offer” and taking into account the upper limit, assuming a range of averages of the daily VWAP of Danaher common stock and NetScout common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share value of Danaher common stock, the indicative calculated per-unit value of Newco common units and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE and NASDAQ on May 12, 2015, based on the daily VWAPs of Danaher common stock and NetScout common stock on May 8, 2015, May 11, 2015 and May 12, 2015. The table also shows the effects of a 10% increase or decrease in either or both the calculated per-share value of Danaher common stock and the calculated per-unit value of Newco common units based on changes relative to the values as of May 12, 2015.

 

 

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Danaher common stock

  NetScout
common stock
  Calculated
per-share

value of
Danaher
common stock(A)
    Calculated
per-unit
value (before the
7% discount)
of Newco
common units(B)
    Newco
common units
to be received
per share of
Danaher
common stock
tendered (the
exchange
ratio)(C)
    Calculated
Value
Ratio(1)
 

As of May 12, 2015

  As of May 12, 2015   $ 84.2876      $ 41.5824        2.1796        1.08   

Down 10%

  Up 10%   $ 75.8588      $ 45.7406        1.7833        1.08   

Down 10%

  Unchanged   $ 75.8588      $ 41.5824        1.9616        1.08   

Down 10%

  Down 10%   $ 75.8588      $ 37.4241        2.1796        1.08   

Unchanged

  Up 10%   $ 84.2876      $ 45.7406        1.9814        1.08   

Unchanged

  Down 10%(2)(3)   $ 84.2876      $ 37.4241        2.2522        1.00   

Up 10%

  Up 10%   $ 92.7164      $ 45.7406        2.1796        1.08   

Up 10%

  Unchanged(2)(4)   $ 92.7164      $ 41.5824        2.2522        1.01   

Up 10%

  Down 10%(2)(5)   $ 92.7164      $ 37.4241        2.2522        0.91   

 

(1) The Calculated Value Ratio equals (i) the calculated per-unit value of Newco common units (B) multiplied by the exchange ratio (C), divided by (ii) the calculated per-share value of Danaher common stock (A), rounded to the nearest two decimals.
(2) In this scenario, Danaher would announce that the upper limit on the number of Newco common units that can be received for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period no later than 4:30 p.m., New York City time, on the expiration date, that the exchange ratio will be fixed at the upper limit and that this exchange offer will be extended until 12:00 midnight, New York City time, on the second trading day following the expiration date.
(3) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 2.4218 Newco common units per share of Danaher common stock validly tendered and accepted in this exchange offer. In this scenario, tendering Danaher shareholders would receive less than $100 in value of Newco common units for each $100 in value of Danaher common stock.
(4) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 2.3975 Newco common units per share of Danaher common stock validly tendered and accepted in this exchange offer.
(5) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 2.6639 Newco common units per share of Danaher common stock validly tendered and accepted in this exchange offer. In this scenario, tendering Danaher shareholders would receive less than $100 in value of Newco common units for each $100 in value of Danaher common stock.

During the three–month period of February 12, 2015 through May 12, 2015, the highest closing price of Danaher common stock on the NYSE was $87.81 and the lowest closing price of NetScout common stock on NASDAQ was $38.41. If the calculated per-share value of Danaher common stock and the calculated per-unit value of Newco common units equaled these closing prices, you would receive only the limit of 2.2522 Newco common units for each share of Danaher common stock tendered, and the value of such Newco common units, based on the NetScout common stock price, would have been approximately $98.52 of Newco common units for each $100 of Danaher common stock accepted for exchange.

Extension; Termination

This exchange offer, and your withdrawal rights, will expire at 12:00 midnight, New York City time, on July 8, 2015, unless this exchange offer is extended or terminated. You must tender your shares of Danaher common stock prior to this time if you want to participate in this exchange offer. Danaher may extend, terminate or amend this exchange offer as described in this prospectus.

 

 

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Danaher will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day following any extension, amendment, non–acceptance or termination of the previously scheduled expiration date.

Mandatory Extension

If the upper limit on the number of shares that can be received for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date.

In case of an extension of this exchange offer (mandatory or otherwise), Danaher will publicly announce the extension by press release no later than 9:00 a.m., New York City time, on the first trading day following the previously scheduled expiration date.

Conditions for Consummation of this Exchange Offer

Danaher’s obligation to exchange Newco common units for shares of Danaher common stock is subject to the conditions listed under “This Exchange Offer—Conditions for Consummation of this Exchange Offer,” including the satisfaction of conditions to the Transactions and other conditions. These conditions include:

 

    the absence of a market disruption event;

 

    the approval of NetScout’s stockholders of the issuance of shares of NetScout common stock in the Mergers;

 

    the registration statements on Forms S-4 and S-1 of which this prospectus is a part have become effective under the Securities Act;

 

    the receipt by Danaher of the IRS ruling (which IRS ruling has been received);

 

    the receipt by Danaher and Newco of the Tax Opinion from Danaher’s tax counsel, dated as of the closing date of the First Merger;

 

    the completion of various transaction steps;

 

    the satisfaction or waiver of the minimum amount condition (as defined below); and

 

    other customary conditions.

For a description of the material conditions precedent to the Transactions, see “The Merger Agreement—Conditions to the Merger.”

Danaher may waive any of the conditions to this exchange offer prior to the expiration of this exchange offer. Newco has no right to waive any of the conditions to this exchange offer. NetScout has no right to waive any of the conditions to this exchange offer (other than certain conditions relating to the other transactions).

Proration; Odd-Lots

If, upon the expiration of this exchange offer, Danaher stockholders have validly tendered more shares of Danaher common stock than Danaher is able to accept for exchange (taking into account the exchange ratio and the total number of Newco common units being exchanged by Danaher in this exchange offer), Danaher will accept for exchange the shares of Danaher common stock validly tendered and not properly withdrawn by each tendering stockholder on a pro rata basis, based on the proportion that the total number of shares of Danaher

 

 

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common stock to be accepted bears to the total number of shares of Danaher common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of Danaher common stock, and subject to any adjustment necessary to ensure the exchange of all Newco common units being owned by Danaher), except for tenders of odd-lots, as described below.

Danaher will announce the preliminary proration factor for this exchange offer at http://www.danaher.com/netscout and separately by press release promptly after the expiration of this exchange offer. Upon determining the number of shares of Danaher common stock validly tendered for exchange and not properly withdrawn, Danaher will announce the final results of the exchange offer, including the final proration factor for this exchange offer.

Beneficial holders (other than plan participants in the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan) of less than 100 shares of Danaher common stock who validly tender all of their shares may elect not to be subject to proration by completing the section in the applicable letter of transmittal entitled “Odd-Lot Shares.” If your odd-lot shares are held by a broker for your account, you can contact the broker and request this preferential treatment. All of your odd-lot shares will be accepted for exchange without proration if Danaher completes this exchange offer.

Fractional Shares

Following the consummation of the Exchange Offer, Merger Sub will be merged with and into Newco, whereby the separate corporate existence of Merger Sub will cease and Newco will continue as the surviving company and a wholly-owned subsidiary of NetScout. Each outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into the right to receive a number of duly authorized, validly issued, fully paid and nonassessable shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger (other than Newco common units held by Danaher, Newco, NetScout or Merger Sub that are to be canceled). In this conversion of Newco common units into shares of NetScout common stock, no fractional shares of NetScout common stock will be delivered to holders of Newco common units. Instead, holders of Newco common units who would otherwise be entitled to receive a fractional share of NetScout common stock will receive in cash the dollar amount (rounded to the nearest whole cent) determined by multiplying such fraction by the closing price of NetScout common stock on NASDAQ on the last business day prior to the effective time of the First Merger. The amount received by such holders of Newco common units will be net of any required withholding taxes.

Procedures for Tendering

For you to validly tender your shares of Danaher common stock pursuant to this exchange offer, prior to the expiration of this exchange offer:

 

    If you hold certificates representing shares of Danaher common stock, or if your shares of Danaher common stock are held in book-entry via the DRS, you must deliver to the exchange offer agent a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents. If you hold certificates representing shares of Danaher common stock, you must also deliver to the exchange offer agent the certificates representing the shares of Danaher common stock tendered. Since certificates are not issued for DRS shares, you do not need to deliver any certificates representing those shares to the exchange offer agent.

 

 

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    If you hold shares of Danaher common stock through a broker, you should receive instructions from your broker on how to participate in this exchange offer. In this situation, do not complete a letter of transmittal to tender your Danaher common stock. Please contact your broker directly if you have not yet received instructions. Some financial institutions may also effect tenders by book-entry transfer through The Depository Trust Company.

 

    If you hold shares of Danaher common stock in your account under the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan, you should receive instructions from the applicable plan record keeper via letter or email informing you how to make an election. In this situation, do not complete a letter of transmittal to tender your shares of Danaher common stock. Please contact the phone number in the letter or email you receive from the applicable plan record keeper to speak with a customer service associate if you have not yet received instructions from such plan record keeper.

Delivery of Newco Common Units

Upon the consummation of this exchange offer, Danaher will deliver to the exchange offer agent, and the exchange offer agent will hold, for the account of the relevant Danaher stockholders, the global certificate(s) representing (a) all of the Newco common units being exchanged in this exchange offer, with irrevocable instructions to hold the Newco common units as agent for the holders of shares of Danaher common stock validly tendered and not properly withdrawn in the exchange offer and, (b) in the case of a pro rata distribution, if any, Newco common units being issued to Danaher stockholders whose shares of Danaher common stock remain outstanding after the consummation of the exchange offer. Prior to the effective time of the First Merger, NetScout will deposit with the merger exchange agent for the benefit of persons who received Newco common units in this exchange offer evidence in book-entry form representing the shares of NetScout common stock issuable in the First Merger. Shares of NetScout common stock will be delivered immediately following the consummation of this exchange offer, the acceptance of Danaher common stock for exchange, and the effectiveness of the First Merger, pursuant to the procedures determined by the exchange offer agent and the merger exchange agent. See “This Exchange Offer—Terms of this Exchange Offer—Exchange of Shares of Danaher Common Stock.”

Withdrawal Rights

Shares of Danaher common stock validly tendered pursuant to this exchange offer may be withdrawn at any time before 12:00 midnight, New York City time, on the expiration date by following the procedures described herein. If you change your mind again, you may re-tender your Danaher common stock by again following the exchange offer procedures prior to the expiration of this exchange offer.

No Appraisal Rights

No appraisal rights are available to holders of Danaher common stock in connection with this exchange offer or any pro rata spin-off distribution (in the event the exchange offer is not fully subscribed) of Newco common units.

Distribution of Newco Common Units Remaining After this Exchange Offer

In the event the exchange offer is not fully subscribed, all Newco common units owned by Danaher that are not exchanged in this exchange offer will be distributed as a pro rata spin-off distribution to holders of Danaher common stock as of the record date. The record date for the spin-off will be formally announced by press release by Danaher. Any Danaher stockholder who validly tenders (and does not properly withdraw) shares of Danaher

 

 

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common stock for Newco common units will waive their rights with respect to such shares to receive, and forfeit any rights to, Newco common units distributed on a pro rata basis to Danaher stockholders in the event the exchange offer is not fully subscribed.

If this exchange offer is consummated, the exchange offer agent will calculate the exact number of Newco common units not exchanged in this exchange offer to be distributed on a pro rata basis, and that number of Newco common units will be held as agent for holders of Danaher common stock entitled thereto.

If this exchange offer is terminated by Danaher without the exchange of shares, but the conditions for consummation of the Transactions have otherwise been satisfied, Danaher intends to distribute all Newco common units owned by Danaher on a pro rata basis to holders of Danaher common stock, with a record date to be announced by Danaher.

Risk Factors

In deciding whether to tender your shares of Danaher common stock in this exchange offer, you should carefully consider the matters described in the section “Risk Factors,” as well as other information included in this prospectus and the other documents to which you have been referred.

Board of Directors and Management of NetScout Following the Transactions

Directors of NetScout serving on its board of directors immediately before the effective time of the First Merger are expected to continue to serve as directors of NetScout immediately following the closing of the Mergers. In addition, as of immediately following the effective time of the First Merger, NetScout will increase the size of its board of directors by one member, and one individual selected by Danaher (which individual is currently anticipated by NetScout and Danaher to be James A. Lico, Danaher’s Executive Vice President) will be appointed to fill the vacancy and will, subject to the fiduciary duties of NetScout’s board of directors, be nominated for re-election at the expiration of such director’s initial term. However, if Danaher’s designated director: (i) is unwilling or unable to serve at the effective time of the First Merger; (ii) is unwilling or unable to serve when such new term starts; or (iii) is not nominated to serve such new term, then Danaher will designate a replacement, acceptable to NetScout in its sole discretion, for such director before the effective time of the First Merger or the start of such new term, as applicable.

It is expected that NetScout’s current management team will remain intact for the combined business, but may be augmented with new management team members from Danaher. The executive officers of NetScout immediately prior to the closing of the Mergers are expected to remain the executive officers of NetScout immediately following the closing of the Mergers. The Merger Agreement provides that NetScout and Newco will take all necessary action to appoint certain specified individuals to management and/or executive officer positions at NetScout or Newco as of the effective time of the Mergers.

Interests of Certain Persons in the Transactions

Based on publicly available filings as of March 9, 2015, Danaher’s directors and executive officers owned approximately 13% of the outstanding shares of Danaher’s common stock and, as of May 1, 2015, NetScout’s directors and executive officers owned approximately 6.5% of the outstanding shares of NetScout common stock. None of NetScout’s or Newco’s executive officers will receive any severance or other compensation as a result of the Transactions. The directors and officers of Danaher, Newco and NetScout will receive no extra or special benefit that is not shared on a pro rata basis by all other Newco common unit holders and NetScout stockholders in connection with the Transactions. As with all holders of shares of Danaher common stock, if a director or officer of Danaher, Newco or NetScout owns shares of Danaher common stock, directly or indirectly, such

 

 

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person may participate in the exchange offer on the same terms as other holders of shares of Danaher common stock. Based on publicly-available filings, as of May 1, 2015, Danaher owned approximately 2.9% of the outstanding shares of NetScout common stock (not including any shares Danaher may be deemed to beneficially own pursuant to the Voting Agreement).

In connection with the execution of the Merger Agreement, Steven M. Rales, Chairman of the Board of Directors of Danaher, and Mitchell P. Rales, Chairman of the Executive Committee of Danaher, delivered separate letters to NetScout, in which they each agreed not to exchange more than the number of shares of Danaher common stock in an exchange offer for Newco common units that would result (after taking into consideration any Newco common units distributed in a pro-rata spin off to Danaher stockholders in the event the exchange offer is not fully subscribed) in his receiving more than 5% of the issued and outstanding shares of NetScout common stock after giving effect to the closing under the Merger Agreement.

NetScout’s Stockholders Vote

NetScout cannot complete the Transactions unless the proposal relating to the issuance of shares of NetScout common stock in the First Merger is approved by the affirmative vote of a majority of the shares of NetScout common stock represented and voting at the special meeting, either in person or by proxy (assuming a quorum is present). Anil K. Singhal, NetScout’s Chief Executive Officer, has agreed with Danaher to vote the shares of NetScout common stock that he owns, representing approximately 5.5% of the outstanding shares of NetScout common stock as of May 1, 2015, the record date of the special meeting, in favor of the issuance of shares of NetScout common stock. In addition, Danaher intends to vote the shares of NetScout common stock that Danaher owns, representing approximately 2.9% of the outstanding shares of NetScout common stock as of May 1, 2015, in favor of the issuance of shares of NetScout common stock in the First Merger. No vote of Danaher stockholders is required or being sought in connection with the Transactions.

Accounting Treatment and Considerations

ASC 805, Business Combinations, requires the use of the acquisition method of accounting for business combinations. In applying the acquisition method, it is necessary to identify both the accounting acquiree and the accounting acquiror. In a business combination effected through an exchange of equity interests, such as the Mergers, the entity that issues the interests (NetScout in this case) is generally the acquiring entity. In identifying the acquiring entity in a combination effected through an exchange of equity interests, however, all pertinent facts and circumstances must be considered, including the following:

 

    The relative voting interests of significant shareholders and the ability of any of those shareholders to exercise control over the consolidated entity after the Transactions. In this case, it was determined that the shareholder bases of both entities are dispersed such that no single shareholder or group of related shareholders would control the entity after the Transactions.

 

    The composition of the governing body of NetScout after the Transactions. In this case, the board of directors of NetScout immediately following the Mergers is expected to consist of the members of the board of directors of NetScout immediately prior to the consummation of the Mergers. In addition, as of the consummation of the Mergers, NetScout will increase the size of its board of directors by one member, and one individual selected by Danaher (which individual is currently anticipated by NetScout and Danaher to be James A. Lico, Danaher’s Executive Vice President) will be appointed to fill the vacancy and will, subject to the fiduciary duties of NetScout’s board of directors, be nominated for re-election at the expiration of such director’s initial term.

 

   

The composition of the senior management of NetScout after the Transactions. In this case, it is expected that NetScout’s current management team will remain intact for the combined business, but may be augmented with new management team members from Danaher. The executive officers of

 

 

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NetScout immediately prior to the closing of the Mergers are expected to remain the executive officers of NetScout immediately following the closing of the Mergers.

NetScout’s management has determined that NetScout will be the accounting acquiror in the Mergers based on the facts and circumstances outlined above and the detailed analysis of the relevant GAAP guidance. Consequently, NetScout will apply acquisition accounting to the assets acquired and liabilities assumed of Newco upon consummation of the Mergers. Upon consummation of the Mergers, the historical financial statements will reflect only the operations and financial condition of NetScout.

Material U.S. Federal Income Tax Consequences of the Transactions

Danaher will receive the Tax Opinion from Skadden to the effect that the Distribution offer will qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code and that the Mergers will qualify as tax-free transactions under Section 368(a)(1)(A) of the Code. Assuming that the Distribution and the Mergers so qualify, for U.S. federal income tax purposes, no gain or loss will be recognized by a holder of Danaher common stock upon the receipt of Newco common units pursuant to the exchange offer or spin-off (in the event the exchange offer is not fully subscribed) or upon the exchange of Newco common units for NetScout common stock pursuant to the First Merger other than with respect to cash received in lieu of fractional shares, and Danaher will not recognize gain or loss with respect to the transfer of Newco common units pursuant to the Distribution. A holder of Newco common units generally will recognize capital gain or loss with respect to cash received in lieu of fractional shares of NetScout common stock in the First Merger.

Danaher has received a ruling from the IRS regarding certain issues relevant to the qualification of the Distribution and certain other aspects of the Separation for tax-free treatment for U.S. federal income tax purposes.

If the exchange offer were determined not to qualify for non-recognition of gain and loss under Sections 355 and 368(a)(1)(D) of the Code, each Danaher stockholder who receives Newco common units in the exchange offer would generally be treated as recognizing taxable gain or loss equal to the difference between the fair market value of the Newco common units received by the stockholder in the exchange offer and its tax basis in the shares of Danaher common stock exchanged therefor, or, in certain circumstances, as receiving a taxable distribution equal to the fair market value of the Newco common units received by the stockholder in the exchange offer. If the spin-off (in the event the exchange offer is not fully subscribed) were determined not to qualify for non-recognition of gain and loss under Sections 355 and 368(a)(1)(D) of the Code, each Danaher stockholder who receives Newco common units in the spin-off would generally be treated as receiving a taxable distribution equal to the fair market value of the Newco common units received by the stockholder in the spin-off.

In addition, if the Distribution were determined not to qualify for non-recognition of gain and loss under Sections 355 and 368(a)(1)(D) of the Code, Danaher would generally recognize gain with respect to the transfer of Newco common units in the Distribution.

The Distribution and certain aspects of the Separation could be taxable to Danaher if Newco, its unit holders, NetScout or NetScout’s stockholders were to engage in certain transactions after the distribution is completed (each, a “Disqualifying Action”). In such cases, Newco and/or NetScout would be required to indemnify Danaher for any resulting taxes and related expenses, which amount could be material.

If the Mergers were determined not to qualify for non-recognition of gain and loss under Section 368 of the Code, Newco common unit holders would be considered to have made a taxable sale of their Newco common units to NetScout, and Newco common unit holders would generally recognize taxable gain or loss on their receipt of NetScout common stock in the Mergers.

 

 

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Please see “Risk Factors—Risks Related to the Transactions—The distribution could result in significant tax liability, and NetScout may be obligated to indemnify Danaher for any such tax liability imposed on Danaher,” “Risk Factors—Risks Related to the Transactions—If the Mergers do not qualify as a tax-free reorganization under Section 368 of the Code, the stockholders of Danaher may have significant tax liability,” and “Material U.S. Federal Income Tax Consequences of the Transactions” for more information regarding the IRS ruling, the Tax Opinion and the potential tax consequences of the Transactions. Holders of Danaher common stock should consult their tax advisor as to the particular tax consequences of the Transactions.

Regulatory Approvals

Under the HSR Act and the rules promulgated under the HSR Act by the Federal Trade Commission, the parties must file notification and report forms with the U.S. Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and observe specified waiting period requirements before consummating the Mergers. NetScout and Danaher each filed the requisite notification and report forms with the Federal Trade Commission and the Antitrust Division on October 24, 2014. NetScout withdrew its filing on November 24, 2014 and refiled on November 26, 2014.

On December 24, 2014, NetScout received a request for additional information (“second request”) from the U.S. Department of Justice. The effect of the second request was to extend the waiting period imposed by the HSR Act until 30 days after both NetScout and Danaher substantially complied with the request, unless that period was extended voluntarily by the parties or terminated sooner by the U.S. Department of Justice. On April 22, 2015, the Antitrust Division of the U.S. Department of Justice gave Danaher and NetScout written notice that it had closed its investigation into the Transactions, which effectively terminated the waiting period under the HSR Act.

 

 

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary combined financial data of the Communications Business and summary consolidated financial data of Danaher and NetScout are being provided to help you in your analysis of the financial aspects of the Transactions. You should read this information in conjunction with the financial information included elsewhere and incorporated by reference into this document. See “Where You Can Find More Information; Incorporation by Reference,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Communications Business,” “Information on the Communications Business,” “Information on Danaher,” “Information on NetScout,” and “Selected Financial Statement Data.”

Summary Historical Combined Financial Data of the Communications Business

Newco is a newly-formed holding company organized for the purpose of holding the Communications Business and consummating the Transactions with NetScout. The following data, insofar as it relates to each of the years 2012 through 2014, has been derived from audited annual financial statements, including the combined balance sheets at December 31, 2014 and December 31, 2013 and the related combined statements of earnings for each of the three years in the period ended December 31, 2014 and notes thereto appearing elsewhere herein. The data as of December 31, 2012 and for the year ended December 31, 2011 has been derived from audited combined financial statements not included or incorporated by reference in this document. The data as of December 31, 2011 and 2010 and for the year ended December 31, 2010 has been derived from unaudited combined financial information not included or incorporated by reference into this document. This information is only a summary and you should read the table below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Communications Business” and the financial statements of the Communications Business and the notes thereto included elsewhere in this document ($ in thousands).

 

    As of and for the Year Ended December 31  
    2014     2013     2012     2011     2010  

Sales

         

Product

  $ 535,281      $ 623,632      $ 594,770      $ 483,782      $ 367,141   

Service

    224,942        211,259        190,968        185,497        121,204   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total sales

$ 760,223    $ 834,891    $ 785,738    $ 669,279    $ 488,345   

Earnings before income taxes

  62,335      116,598      157,881      106,722      43,707   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

  42,552      83,806      103,798      74,371      28,028   

Total assets

$ 1,238,829    $ 1,235,903    $ 1,185,543    $ 998,760    $ 1,047,998   

Summary Historical Consolidated Financial Data of Danaher

The following summary historical consolidated financial data of Danaher as of and for each of the fiscal years in the three-year period ended December 31, 2014 has been derived from the audited consolidated financial statements of Danaher incorporated by reference into this prospectus. This information is only a summary and should be read in conjunction with the financial statements of Danaher and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in Danaher’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation By Reference.”

 

 

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     As of and for the
Year Ended December 31
 
     2014      2013      2012  
     (In millions, except per share data and
ratio data)
 

Statement of Earnings Data

        

Sales

   $ 19,913.8       $ 19,118.0       $ 18,260.4   

Operating profit (1)

     3,431.3         3,274.9         3,165.1   

Net earnings from continuing operations

     2,598.4         2,695.0         2,299.3   

Earnings from discontinued operations, net of income taxes

     —           —           92.9   
  

 

 

    

 

 

    

 

 

 

Net earnings

$ 2,598.4    $ 2,695.0    $ 2,392.2   
  

 

 

    

 

 

    

 

 

 

Net earnings per share from continuing operations:

Basic

$ 3.70    $ 3.87    $ 3.32   

Diluted

$ 3.63    $ 3.80    $ 3.23   
  

 

 

    

 

 

    

 

 

 

Net earnings per share from discontinued operations:

Basic

$ —      $ —      $ 0.13   

Diluted

$ —      $ —      $ 0.13   
  

 

 

    

 

 

    

 

 

 

Net earnings per share:

Basic

$ 3.70    $ 3.87    $ 3.45   

Diluted

$ 3.63    $ 3.80    $ 3.36   
  

 

 

    

 

 

    

 

 

 

Dividends declared per share

$ 0.40    $ 0.10    $ 0.10   

Total assets

$ 36,991.7    $ 34,672.2    $ 32,941.0   

Total debt

$ 3,473.4    $ 3,499.0    $ 5,343.1   

Ratio of Earnings to Fixed Charges (2)

  25.6      22.6      17.6   

 

(1) This term is distinct from the term “Operating Profit” as defined in the section of this prospectus entitled “Helpful Information” because the definition of “Operating Profit” in such section is specific to the Communications Business.
(2) These ratios include Danaher Corporation and its consolidated subsidiaries. The ratio of earnings to fixed

charges was computed by dividing earnings by fixed charges for the periods indicated, where “earnings”

consist of (1) earnings (excluding earnings from equity investees) before income taxes plus distributed

income of equity investees; plus (2) fixed charges, and “fixed charges” consist of (A) interest, whether

expensed or capitalized, on all indebtedness, (B) amortization of premiums, discounts and capitalized

expenses related to indebtedness, and (C) an interest component representing the estimated portion of rental

expense that management believes is attributable to interest. Interest on unrecognized tax benefits is

included in the tax provision in the Company’s Consolidated Condensed Statements of Earnings and is

excluded from the computation of fixed charges.

 

 

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Summary Historical Consolidated Financial Data of NetScout

The following summary historical consolidated financial data of NetScout for the years ended March 31, 2014, 2013 and 2012, and as of such dates, has been derived from NetScout’s audited consolidated financial statements as of and for the years ended March 31, 2014, 2013 and 2012. The following summary historical consolidated financial data as of and for the nine-month periods ended December 31, 2014 and 2013 has been derived from the unaudited consolidated financial statements of NetScout and is not necessarily indicative of the results or financial condition to be expected for the remainder of the year or for any future period. NetScout’s management believes that the unaudited consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for the results and the financial condition as of and for the interim periods presented to be fairly stated. This information is only a summary and should be read in conjunction with the financial statements of NetScout and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in NetScout’s annual report on Form 10-K for the year ended March 31, 2014 and quarterly report on Form 10-Q for the period ended December 31, 2014, each of which is incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

 

     As of and for the
Nine Months Ended
December 31,
    As of and for the
Year Ended March 31,
 
   2014     2013     2014     2013     2012  
     (In thousands, except per share data)  

Results of Operations:

          

Revenue:

          

Product

   $ 198,765      $ 163,895      $ 234,268      $ 198,749      $ 168,141   

Service

     135,519        120,435        162,379        151,801        140,538   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  334,284      284,330      396,647      350,550      308,679   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue:

Product

  45,015      36,117      51,219      45,752      39,271   

Service

  26,158      24,111      33,294      28,256      26,401   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

  71,173      60,228      84,513      74,008      65,672   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  263,111      224,102      312,134      276,542      243,007   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

Research and development

  56,872      50,951      70,454      61,546      49,478   

Sales and marketing

  104,304      96,184      129,611      116,807      109,624   

General and administrative

  33,211      22,367      30,623      29,718      27,488   

Amortization of acquired intangible assets

  2,539      2,571      3,432      2,877      2,131   

Restructuring charges

  —        —        —        1,065      603   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  196,926      172,073      234,120      212,013      189,324   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

  66,185      52,029      78,014      64,529      53,683   

Interest and other expense, net

  (1,186   (88   (158   (793   (2,765
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

  64,999      51,941      77,856      63,736      50,918   

Income tax expense

  24,661      19,511      28,750      23,127      18,490   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 40,338    $ 32,430    $ 49,106    $ 40,609    $ 32,428   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per share

$ 0.98    $ 0.78    $ 1.19    $ 0.97    $ 0.77   

Diluted net income per share

$ 0.97    $ 0.77    $ 1.17    $ 0.96    $ 0.76   

 

 

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     As of and for the
Nine Months Ended
December 31,
    As of and for the
Year Ended March 31,
 
   2014     2013     2014     2013     2012  
     (In thousands, except per share data)  

Financial Highlights:

          

Cash, cash equivalents and short and long-term marketable securities

   $ 240,726      $ 182,213      $ 218,794      $ 154,091      $ 213,516   

Total assets

   $ 638,928      $ 577,877      $ 607,763      $ 552,176      $ 567,757   

Debt

   $ —        $ —        $ —        $ —        $ 62,000   

Total stockholders’ equity

   $ 432,118      $ 395,598      $ 409,161      $ 371,903      $ 342,369   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flow Data:

Cash from operating activities

$ 57,322    $ 60,767    $ 110,946    $ 95,412    $ 68,307   

Purchases of fixed assets

$ (8,630 $ (8,709 $ (13,066 $ (11,671 $ (11,088

Purchases of intangible assets

$ (131 $ (713 $ (1,086 $ (277 $ (200

Non-GAAP free cash flow

$ 48,561    $ 51,345    $ 96,794    $ 83,464    $ 57,019   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Selected Data:

Weighted average common shares outstanding–basic

  41,128      41,417      41,366      41,665      42,035   

Weighted average common shares outstanding–diluted

  41,679      41,969      41,955      42,322      42,750   

Non-GAAP revenue(1)

$ 334,302    $ 284,749    $ 397,205    $ 351,765    $ 308,991   

Non GAAP net income(1)

$ 56,445    $ 43,992    $ 64,218    $ 56,014    $ 46,970   

Non-GAAP net income per share(1)

$ 1.35    $ 1.05    $ 1.53    $ 1.32    $ 1.10   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) For the reconciliation of GAAP to non-GAAP revenue, GAAP to non-GAAP net income, and GAAP to non-GAAP net income per share, see “Selected Financial Statement Data—Selected Historical Consolidated Financial Data of NetScout.”

 

 

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Summary Unaudited Combined Pro Forma Financial Data of NetScout and the Communications Business

The following summary unaudited pro forma combined financial information of NetScout and the Communications Business is being presented for illustrative purposes only, and this information should not be relied upon for purposes of making any investment or other decisions. The following summary unaudited pro forma combined financial data assumes that the Communications Business had been owned by NetScout for all periods, and at the date presented. NetScout and the Communications Business may have performed differently had they actually been combined for all periods or on the date presented. You should also not rely on the following summary unaudited pro forma combined financial data as being indicative of the results or financial condition that would have been achieved had NetScout and the Communications Business been combined other than during the periods or on the date presented or of the actual future results or financial condition of NetScout to be achieved following the Transactions.

 

     As of and for the
Nine Months Ended
December 31, 2014
    As of and for the
Year Ended March 31, 2014
 
     (In thousands, except per share data)  

Results of Operations:

    

Revenue:

    

Product

   $ 560,687      $ 842,169   

Service

     295,046        335,931   
  

 

 

   

 

 

 

Total revenue

  855,733      1,178,100   
  

 

 

   

 

 

 

Cost of revenue

Product

  199,541      282,677   

Service

  65,244      81,806   
  

 

 

   

 

 

 

Total cost of revenue

  264,785      364,483   
  

 

 

   

 

 

 

Gross profit

  590,948      813,617   
  

 

 

   

 

 

 

Operating expenses:

Research and development

  176,072      220,149   

Sales and marketing

  261,460      308,033   

General and administrative

  89,800      133,113   

Amortization of acquired intangible assets

  55,258      46,840   

Impairment of intangible assets

  —        31,063   
  

 

 

   

 

 

 

Total operating expenses

  582,590      739,198   
  

 

 

   

 

 

 

Income from operations

  8,358      74,419   

Total other income (expense)

  (1,186   (158
  

 

 

   

 

 

 

Income before income tax expense

  7,172      74,261   

Income tax expense

  1,638      15,869   
  

 

 

   

 

 

 

Net income

$ 5,534    $ 58,392   
  

 

 

   

 

 

 

Per share information:

Basic net income per share:

$ 0.05    $ 0.56   

Diluted net income per share:

$ 0.05    $ 0.56   

Weighted average common shares outstanding used in computing

Net income per share - Basic

  103,628      103,866   

Net income per share - Diluted

  104,211      104,497   

 

 

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     December 31, 2014  
     (In thousands, except per
share data)
 

Financial Highlights:

  

Cash and cash equivalents and short and long-term marketable securities

   $ 248,138   

Total Assets

   $ 4,015,882   

Debt

   $ —     

Total stockholders’ equity

   $ 3,114,669   

Summary Comparative Historical and Pro Forma Per Share Data

The following table sets forth certain historical and pro forma per share data for NetScout. The NetScout historical data has been derived from and should be read together with NetScout’s audited consolidated financial statements and related notes thereto contained in NetScout’s annual report on Form 10-K for the fiscal year ended March 31, 2014, and NetScout’s unaudited consolidated financial statements and related notes thereto contained in NetScout’s quarterly report on Form 10-Q for the period ended December 31, 2014, each of which are incorporated by reference into this prospectus. The pro forma data has been derived from the unaudited pro forma combined financial statements of NetScout and the Communications Business included elsewhere in this prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

This summary comparative historical and pro forma per share data is being presented for illustrative purposes only. NetScout and the Communications Business may have performed differently had the Transactions occurred prior to the periods or at the date presented. You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had NetScout and the Communications Business been combined during the periods or at the date presented or of the actual future results or financial condition of NetScout or the Communications Business to be achieved following the Transactions.

 

     As of and for the
Nine Months Ended
December 31, 2014
     As of and for the
Year Ended
March 31, 2014
 
(shares in thousands)    Historical      Pro Forma      Historical      Pro Forma  

Basic earnings per share

   $ 0.98       $ 0.05       $ 1.19       $ 0.56   

Diluted earnings per share

   $ 0.97       $ 0.05       $ 1.17       $ 0.56   

Weighted average common shares outstanding—Basic

     41,128         103,628         41,366         103,866   

Weighted average common shares outstanding—Diluted

     41,679         104,211         41,955         104,497   

Book value per share of common stock

   $ 10.48       $ 30.03       $ 9.94         Not available   

Historical Common Stock Market Price and Dividend Data

Historical market price data for Newco has not been presented because the Communications Business is currently operated by Danaher and there is no established trading market in Newco common units. Newco common units do not currently trade separately from Danaher common stock.

Shares of Danaher common stock currently trade on the NYSE under the symbol “DHR.” On October 10, 2014, the last trading day before the announcement of the Transactions, the last sale price of Danaher’s common stock reported by the NYSE was $71.86. On May 12, 2015, the last sale price of Danaher common stock reported by the NYSE was $86.00.

Shares of NetScout common stock currently trade on NASDAQ under the symbol “NTCT.” On October 10, 2014, the last trading day before the announcement of the Transactions, the last sale price of NetScout’s common stock reported by NASDAQ was $41.91. On May 12, 2015, the last sale price of NetScout common stock reported by NASDAQ was $41.13.

 

 

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The following table sets forth, for the periods indicated, the high and low sales prices per share of Danaher common stock, as reported on the NYSE, and NetScout common stock, as reported on NASDAQ. In addition, the table also sets forth the quarterly cash dividends per share declared by Danaher with respect to Danaher common stock.

 

     Danaher
Per Share

Dividends
    Danaher
Common Stock
     NetScout Common Stock  
       High      Low          High              Low      

Calendar Year Ending December 31, 20151

             

First Calendar Quarter

   $ 0.135      $ 88.10       $ 81.25       $ 44.76       $ 33.53   

Second Calendar Quarter (through May 12, 2015)

   $ —        $ 86.35       $ 81.59       $ 45.53       $ 39.32   

Calendar Year Ending December 31, 2014

             

First Calendar Quarter

   $ 0.10      $ 78.80       $ 71.89       $ 39.10       $ 28.64   

Second Calendar Quarter

   $ 0.10      $ 81.14       $ 71.75       $ 44.54       $ 33.30   

Third Calendar Quarter

   $ 0.10      $ 80.00       $ 73.02       $ 48.13       $ 41.15   

Fourth Calendar Quarter

   $ 0.10      $ 87.49       $ 70.12       $ 46.17       $ 31.59   

Calendar Year Ended December 31, 2013

             

First Calendar Quarter

   $ —   2    $ 62.90       $ 56.17       $ 28.28       $ 23.74   

Second Calendar Quarter

   $ 0.025      $ 64.80       $ 57.61       $ 24.92       $ 21.22   

Third Calendar Quarter

   $ 0.025      $ 70.94       $ 63.16       $ 27.55       $ 23.22   

Fourth Calendar Quarter

   $ 0.025      $ 77.39       $ 66.83       $ 30.76       $ 24.04   

 

1  In order to present the market price and dividend information for Danaher and NetScout on a comparable basis, the information included in the above table is presented for the calendar years and calendar quarters shown rather than the fiscal years and fiscal quarters of Danaher and NetScout.

 

2  Danaher did not make cash payments for dividends during the first quarter of 2013 because Danaher’s board of directors had determined to accelerate the quarterly dividend payment that normally would have been paid in January 2013 and paid it in December 2012.

 

 

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RISK FACTORS

You should carefully consider the following risks, together with the other information contained or incorporated by reference in this prospectus and the annexes hereto. Some of the risks described below relate principally to the business and the industry in which NetScout, including the Communications Business, will operate after the Transactions, while others relate principally to the Transactions and participation in the exchange offer. The remaining risks relate principally to the securities markets generally and ownership of shares of NetScout common stock. For a discussion of additional uncertainties associated with forward-looking statements in this prospectus, please see the section entitled “Cautionary Statement Concerning Forward-Looking Statements.” In addition, you should consider the risks associated with NetScout’s business that appear in NetScout’s Annual Report on Form 10-K for the year ended March 31, 2014 and NetScout’s Quarterly Reports on Form 10-Q for the periods ended June 30, 2014, September 30, 2014 and December 31, 2014, which are incorporated by reference into this prospectus.

Risks Related to the Transactions

The risk to Danaher stockholders that the calculation of the merger consideration will not be adjusted if the value of the business or assets of the Communications Business increases or if the value of NetScout decreases before the Mergers are completed and the risk to NetScout stockholders that the calculation of the merger consideration will not be adjusted if the value of the business or assets of the Communications Business declines or if the value of NetScout increases before the Mergers are completed.

The calculation of the number of shares of NetScout common stock to be distributed in the Mergers will not be adjusted (i) if the value of the business or assets of the Communications Business increases prior to the consummation of the Mergers or the value of NetScout decreases prior to the Mergers, or (ii) if the value of the business or assets of the Communications Business declines prior to the consummation of the Mergers or the value of NetScout increases prior to the Mergers. NetScout will not be required to consummate the Mergers if there has been any Material Adverse Effect on the Communications Business. However, NetScout will not be permitted to terminate the Merger Agreement or resolicit the vote of NetScout stockholders because of any changes in the market prices of NetScout’s common stock or any changes in the value of the Communications Business that do not constitute a Material Adverse Effect with respect to the Communications Business.

The trading prices of NetScout common stock may not be an appropriate proxy for the prices of Newco common units.

The calculated per-unit value for Newco common units is based on the trading prices for NetScout common stock, which may not be an appropriate proxy for the prices of Newco common units. There is currently no trading market for Newco common units and no such market will be established in the future. Danaher believes, however, that the trading prices for NetScout common stock are an appropriate proxy for the trading prices of Newco common units because immediately following the consummation of this exchange offer, Merger Sub will be merged with and into Newco, whereby Newco will continue as the surviving company in the First Merger, and immediately thereafter Newco, as the surviving company in the First Merger, will be merged with and into Merger Sub II, with Merger Sub II surviving as a wholly-owned subsidiary of NetScout. In the First Merger, each outstanding Newco common unit will be cancelled and retired and will cease to exist and the holders of Newco common units (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will receive the right to receive a number of fully paid and nonassessable shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger. In addition, Newco will authorize the issuance of a number of Newco common units such that the total number of Newco common units outstanding immediately prior to the First Merger will be that number that results in the exchange ratio in the First Merger equaling one. As a result, each Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into one share of NetScout common stock in the First

 

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Merger. There can be no assurance, however, that NetScout common stock after the issuance of Newco common units and the Mergers will trade on the same basis as NetScout common stock trades prior to the Transactions. In addition, it is possible that the trading prices of NetScout common stock prior to consummation of the Mergers will not fully reflect the anticipated value of NetScout common stock after the Mergers. For example, trading prices of NetScout common stock on the Valuation Dates could reflect some uncertainty as to the timing or consummation of the Mergers or could reflect trading activity by investors seeking to profit from market arbitrage.

NetScout’s estimates and judgments related to the acquisition accounting models used to record the purchase price allocation may be inaccurate.

Management will make significant accounting judgments and estimates for the application of acquisition accounting under GAAP, and the underlying valuation models. NetScout’s business, operating results and financial condition could be materially and adversely impacted in future periods if NetScout’s accounting judgments and estimates related to these models prove to be inaccurate.

NetScout may be required to recognize impairment charges for goodwill and other intangible assets.

The proposed transaction will add approximately $3.0 billion of goodwill and other intangible assets to NetScout’s consolidated balance sheet. In accordance with GAAP, management periodically assesses these assets to determine if they are impaired. Significant negative industry or economic trends, disruptions to NetScout’s business, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets, divestitures and market capitalization declines may impair goodwill and other intangible assets. Any charges relating to such impairments would adversely affect results of operations in the periods recognized.

NetScout and Danaher may be unable to satisfy the conditions or obtain the approvals required to complete the Mergers.

The consummation of the Mergers is subject to numerous conditions, as described in this prospectus, including consummation of certain transactions contemplated by the Merger Agreement and the Distribution Agreement (such as the Separation and the receipt of NetScout stockholder approval for the issuance of shares of NetScout common stock in the First Merger). Neither Danaher nor NetScout can make any assurances that the Mergers and related transactions will be consummated on the terms or timeline currently contemplated, or at all. Each of Danaher and NetScout has and will continue to expend time and resources and incur expenses related to the proposed Transactions.

Governmental agencies may not approve the Mergers or the related transactions necessary to complete the Mergers or may impose conditions to the approval of such transactions or require changes to the terms of such transactions. Any such conditions or changes could have the effect of delaying completion of the Mergers, imposing costs on or limiting the revenues of the combined company following the Mergers or otherwise reducing the anticipated benefits of the Mergers. Any condition or change which results in a Burdensome Condition on the Communications Business and/or NetScout under the Merger Agreement might cause Danaher and/or NetScout to restructure or terminate the Mergers or the related transactions.

If completed, the Mergers may not be successful or achieve their anticipated benefits.

If the Mergers are completed NetScout may not be able to successfully realize anticipated growth opportunities or integrate NetScout’s business and operations with the Communications Business’ business and operations. After the Mergers, NetScout will have significantly more revenue, expenses, assets and employees than NetScout did prior to the Mergers. In the Separation, NetScout will also be assuming certain liabilities of the Communications Business and taking on other obligations (including collective bargaining agreements and

 

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certain non-U.S. pension obligations with respect to transferred employees). NetScout may not successfully or cost-effectively integrate the Communications Business’ business and operations into NetScout’s existing business and operations. Even if the combined company is able to integrate the combined businesses and operations successfully, this integration may not result in the realization of the full benefits of the growth and other opportunities that NetScout currently expects from the Mergers within the anticipated time frame, or at all.

NetScout is required to abide by potentially significant restrictions which could limit NetScout’s ability to undertake certain corporate actions (such as the issuance of NetScout common stock or the undertaking of a merger or consolidation) that otherwise could be advantageous.

To preserve the tax-free treatment to Danaher and/or its stockholders of the Distribution and certain related transactions, under the Tax Matters Agreement, NetScout is restricted from taking any action that prevents such transactions from being tax-free for U.S. federal income tax purposes. These restrictions may limit NetScout’s ability to pursue certain strategic transactions or engage in other transactions, including using NetScout common stock to make acquisitions and in connection with equity capital market transactions that might increase the value of NetScout’s business. See “Other Agreements—Tax Matters Agreement” for a detailed description of these restrictions.

The Distribution could result in significant tax liability, and NetScout may be obligated to indemnify Danaher for any such tax liability imposed on Danaher.

Danaher will receive the Tax Opinion from Skadden to the effect that the Distribution offer will qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code and that the Mergers will qualify as a tax-free transaction under
Section 368(a)(1)(A) of the Code. Assuming that the Distribution and the Mergers so qualify, for U.S. federal income tax purposes, no gain or loss will be recognized by a holder of Danaher common stock upon the receipt of Newco common units pursuant to the exchange offer or spin-off (in the event the exchange offer is not fully subscribed) or upon the exchange of Newco common units for NetScout common stock pursuant to the First Merger other than with respect to cash received in lieu of fractional shares, and Danaher will not recognize gain or loss with respect to the transfer of Newco units pursuant to the Distribution. Danaher also received a ruling from the IRS regarding certain issues relevant to the qualification of the Distribution and certain other aspects of the Separation for tax-free treatment for U.S. federal income tax purposes.

Although the IRS ruling will generally be binding on the IRS, the continuing validity of such ruling will be subject to the accuracy of factual representations and assumptions made in the ruling request. Also, as part of the IRS’s general policy with respect to rulings on spin-off and split-off transactions (including the Distribution), the IRS will not rule on the overall qualification of the transaction for tax-free treatment, but instead only on certain significant issues related thereto. As a result of this IRS policy, Danaher will obtain the opinion of counsel described above. The opinion will be based upon various factual representations and assumptions, as well as certain undertakings made by Danaher and Newco. If any of those factual representations or assumptions are untrue or incomplete in any material respect, any undertaking is not complied with, or the facts upon which the opinion will be based are materially different from the facts at the time of the Distribution, the Distribution may not qualify for tax-free treatment. Opinions of counsel are not binding on the IRS. As a result, the conclusions expressed in the opinion of counsel could be challenged by the IRS, and if the IRS prevails in such challenge, the tax consequences to Danaher and its stockholders could be materially unfavorable.

If the exchange offer were determined not to qualify for non-recognition of gain and loss under Sections 355 and 368(a)(1)(D) of the Code, each Danaher stockholder who receives Newco common units in the exchange offer would generally be treated as recognizing taxable gain or loss equal to the difference between the fair market value of the Newco common units received by the stockholder in the exchange offer and its tax basis in the shares of Danaher common stock exchanged therefor, or, in certain circumstances, as receiving a taxable distribution equal to the fair market value of the Newco common units received by the stockholder in the

 

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exchange offer. If the spin-off (in the event the exchange offer is not fully subscribed) were determined not to qualify for non-recognition of gain and loss under Sections 355 and 368(a)(1)(D) of the Code, each Danaher stockholder who receives Newco common units in the spin-off would generally be treated as receiving a taxable distribution equal to the fair market value of the Newco common units received by the stockholder in the spin-off.

In addition, if the Distribution were determined not to qualify for non-recognition of gain and loss under Sections 355 and
368(a)(1)(D) of the Code, Danaher would generally recognize gain with respect to the transfer of Newco common units in the Distribution.

The Distribution and certain aspects of the Separation could be taxable to Danaher if Newco, its unit holders, NetScout or NetScout’s stockholders were to engage in a Disqualifying Action (as defined in the Tax Matters Agreement). In such cases, under the Tax Matters Agreement, Newco and NetScout will be required to indemnify Danaher against any taxes resulting from the Distribution or certain aspects of the Separation that arise as a result of a Disqualifying Action. If Danaher were to recognize gain on the Distribution or certain aspects of the Separation for reasons not related to a Disqualifying Action by Newco or NetScout, Danaher would not be entitled to be indemnified under the Tax Matters Agreement and the resulting tax to Danaher could have a material adverse effect on Danaher. If Newco or NetScout were required to indemnify Danaher as a result of the Distribution or certain aspects of the Separation being taxable, this indemnification obligation would likely be substantial and could have a material adverse effect on NetScout, including with respect to its financial condition and results of operations.

If the Mergers do not qualify as a tax-free reorganization under Section 368 of the Code, the stockholders of Danaher may have significant tax liability.

The obligation of Danaher to consummate the First Merger is conditioned, among other things, on Danaher’s receipt of an opinion of Skadden, counsel to Danaher, to the effect that the Mergers will be treated as a tax-free reorganization in which no gain will be recognized for U.S. federal income tax purposes. The opinion will be based upon various factual representations and assumptions, as well as certain undertakings made by Danaher and Newco. If any of those factual representations or assumptions are untrue or incomplete in any material respect, any undertaking is not complied with, or the facts upon which the opinion will be based are materially different from the facts at the time of the Distribution, the Mergers may not qualify for tax-free treatment. Opinions of counsel are not binding on the IRS. As a result, the conclusions expressed in the opinion of counsel could be challenged by the IRS, and if the IRS prevails in such challenge, the tax consequences to Newco and holders of Newco common units could be materially less favorable. If the Mergers were taxable, Newco common unit holders would be considered to have made a taxable sale of their Newco common units to NetScout, and Newco common unit holders would generally recognize taxable gain or loss on their receipt of NetScout common stock in the Mergers. See “Material U.S. Federal Income Tax Consequences of the Transactions.”

Upon completion of the Transactions, NetScout will incur significant expenses in connection with the integration of the Communications Business.

Upon completion of the Transactions, NetScout expects to incur significant expenses in connection with the integration of the Communications Business, including integrating products and technology, personnel, information technology systems, accounting systems, suppliers, and channel partners of each business and implementing consistent standards, policies, and procedures, and may possibly be subject to material write downs in assets and charges to earnings, which may include severance pay and other costs.

 

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Risks Related to the Exchange Offer

Tendering Danaher stockholders may receive a reduced premium or may not receive any premium in this exchange offer.

This exchange offer is designed to permit you to exchange your shares of Danaher common stock for Newco common units at a 7% discount to the per-unit value of Newco common units, calculated as set forth in this prospectus. Stated another way, for each $100 of your Danaher common stock accepted in this exchange offer, you will receive approximately $107.53 of Newco common units (subject to the exception described below). The value of the Danaher common stock will be based on the calculated per-share value of Danaher common stock on the NYSE and the value of the Newco common units will be based on the calculated per-share value of NetScout common stock on NASDAQ, in each case determined by reference to the simple arithmetic average of the daily VWAP on each of the Valuation Dates.

The number of shares you can receive is, however, subject to an upper limit of 2.2522 Newco common units for each share of Danaher common stock accepted in this exchange offer. As a result, you may receive less than $107.53 of Newco common units for each $100 of Danaher common stock, depending on the calculated per-share value of Danaher common stock and the calculated per-unit value of Newco common units at the expiration date. Because of the limit on the number of Newco common units you may receive in this exchange offer, if there is a drop of sufficient magnitude in the trading price of NetScout common stock relative to the trading price of Danaher common stock, and/or if there is an increase of sufficient magnitude in the trading price of Danaher common stock relative to the trading price of NetScout common stock, you may not receive $107.53 of Newco common units for each $100 of Danaher common stock, and could receive much less.

For example, if the calculated per-share value of Danaher common stock was $87.81 (the highest closing price for Danaher common stock on the NYSE during the three–month period prior to commencement of this exchange offer) and the calculated per-unit value of Newco common units was $38.41 (the lowest closing price for NetScout common stock on NASDAQ during that three–month period), the value of Newco common units, based on the NetScout common stock price, received for Danaher common stock accepted for exchange would be approximately $98.52 for each $100 of Danaher common stock accepted for exchange.

This exchange offer does not provide for a minimum exchange ratio. See “This Exchange Offer—Terms of this Exchange Offer.” If the upper limit on the number of Newco common units that can be received for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the upper limit and a Mandatory Extension of this exchange offer will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date to permit stockholders to validly tender or properly withdraw their Danaher common stock during those days. Any changes in the prices of Danaher common stock or NetScout common stock on those additional days of this exchange offer will not, however, affect the exchange ratio.

For example, if the trading price of Danaher common stock were to increase during the last two trading days of the exchange offer, the average Danaher stock price used to calculate the exchange ratio would likely be lower than the closing price of shares of Danaher common stock on the expiration date of the exchange offer. As a result, you may receive fewer Newco common units, and therefore effectively fewer shares of NetScout common stock, for each $100 of shares of Danaher common stock than you would have if the average Danaher stock price was calculated on the basis of the closing price of shares of Danaher common stock on the expiration date of the exchange offer or on the basis of an averaging period that includes the last two trading days prior to the expiration of the exchange offer period. Similarly, if the trading price of NetScout common stock were to decrease during the last two trading days prior to the expiration of the exchange offer period, the average NetScout stock price used to calculate the exchange ratio would likely be higher than the closing price of NetScout common stock on the expiration date. This could also result in your receiving fewer Newco common units, and therefore effectively fewer shares of NetScout common stock, for each $100 of Danaher common stock than you would otherwise receive if the average NetScout common stock price were calculated on the basis

 

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of the closing price of NetScout common stock on the expiration date or on the basis of an averaging period that included the last two trading days prior to the expiration of the exchange offer period.

In addition, there is no assurance that holders of shares of Danaher common stock that are exchanged for Newco common units in this exchange offer will be able to sell the shares of NetScout common stock after receipt in the First Merger at prices comparable to the calculated per-unit value of Newco common units at the expiration date. For example, in the event the exchange offer is not fully subscribed, Danaher will distribute in the spin-off the remaining Newco common units that will convert into NetScout common stock in the First Merger. Danaher stockholders who receive NetScout common stock as a result of the spin-off (in the event the exchange offer is not fully subscribed) and the First Merger may not want to be NetScout common stock holders and may sell those shares immediately in the public market. Although Danaher has no actual knowledge of any plan or intention of any significant stockholder of Danaher to sell the NetScout common stock it receives as a result of the spin-off (in the event the exchange offer is not fully subscribed) and the First Merger, it is possible that some Danaher stockholders will sell the NetScout common stock they receive if, for reasons such as NetScout’s business profile or market capitalization, NetScout does not fit their investment objectives, or in the case of index funds, NetScout is not a participant in the index in which they are investing. The sales of significant amounts of NetScout common stock relating to the above events or the perception in the market that such sales will occur may decrease the market price of NetScout’s common stock.

Following the conversion of Newco common units into shares of NetScout common stock in the First Merger, the former holders of Newco common units may experience a delay prior to receiving their shares of NetScout common stock or their cash in lieu of fractional shares, if any.

Following the conversion of Newco common units into shares of NetScout common stock, the former holders of Newco common units will receive their shares of NetScout common stock or their cash in lieu of fractional shares, if any, only upon surrender of all necessary documents, duly executed, to the exchange offer agent. Until the distribution of the shares of NetScout common stock to the individual stockholder has been completed, the relevant holder of shares of NetScout common stock will not be able to sell its shares of NetScout common stock. Consequently, in case the market price for NetScout common stock should decrease during that period, the relevant stockholder would not be able to stop any losses by selling the shares of NetScout common stock. Similarly, the former holders of Newco common units who received cash in lieu of fractional shares will not be able to invest the cash until the distribution to the relevant stockholder has been completed, and they will not receive interest payments for this time period.

Danaher stockholders’ investment will be subject to different risks after the exchange offer regardless of whether they elect to participate in the exchange offer.

 

    If Danaher stockholders exchange all of their shares of Danaher common stock and the exchange offer is not oversubscribed, then they will no longer have an interest in Danaher, but instead they will directly own an interest in NetScout. As a result, their investment will be subject exclusively to risks associated with NetScout and not risks associated solely with Danaher.

 

    If Danaher stockholders exchange all of their shares of Danaher common stock and the exchange offer is oversubscribed, then the offer will be subject to the proration procedures described below and, unless their odd-lot tender is not subject to proration, such Danaher stockholders will own an interest in both Danaher and NetScout. As a result, their investment will be subject to risks associated with both Danaher and NetScout.

 

   

If Danaher stockholders exchange some, but not all, of their shares of Danaher common stock, then regardless of whether the exchange offer is fully subscribed, the number of shares of Danaher common stock they own will decrease (unless they otherwise acquire shares of Danaher common stock), while the number of Newco common units, and therefore effectively shares of NetScout common stock, they

 

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own will increase. As a result, their investment will be subject to risks associated with both Danaher and NetScout.

 

    In addition to the consequences of the exchange offer described above, Danaher stockholders that remain stockholders of Danaher following the completion of the exchange offer will receive shares of NetScout common stock (although they may instead receive only cash in lieu of a fractional share) when Danaher completes the spin-off (in the event the exchange offer is not fully subscribed) described under “This Exchange Offer—Distribution of Newco Common Units Remaining After This Exchange Offer.” As a result, their investment may be subject to risks associated with both Danaher and NetScout.

Whether or not Danaher stockholders tender their shares of Danaher common stock, any Danaher shares they hold after the completion of the exchange offer will reflect a different investment from the investment they previously held as a result of the distribution of the Communications Business.

Risks Related to the Combined Company’s Business Following the Transactions

NetScout will assume certain non-U.S. pension benefit obligations associated with the Communications Business. Future funding obligations related to these liabilities could restrict cash available for NetScout’s operations, capital expenditures or other requirements, or require NetScout to borrow additional funds.

In the Transactions, NetScout will assume certain funded and unfunded non-U.S. pension obligations related to non-U.S. employees of the Communications Business who become employees of Newco to the extent the assumption is required by applicable law. In connection therewith, Danaher will transfer to NetScout all assets set aside by Danaher to fund such non-U.S. pension obligations related to the Communications Business. If the non-U.S. pension liabilities transferred by Danaher exceed the assets transferred by Danaher, Danaher is obligated to transfer an amount of cash to NetScout equal to the difference between the non-U.S. pension liabilities transferred and the assets transferred. The transfers of assets and non-U.S. pension liabilities will be governed by applicable law, provided that if the mechanism for the transfers is not mandated by applicable law, the assets and liabilities will be transferred on a projected benefit obligation basis in accordance with GAAP.

Funding obligations with respect to non-U.S. pension plans change due to, among other things, the actual investment return on plan assets. Continued volatility in the capital markets may have a further negative impact on the funded status of the non-U.S. pension plans, which may in turn increase attendant funding obligations. Changing economic conditions, poor pension investment returns or other factors may require NetScout to make substantial cash contributions to the pension plans in the future, preventing the use of increased cash contributions for other purposes and adversely affecting NetScout’s liquidity.

While NetScout intends to comply with any future funding obligations for its non-U.S. pension benefit plans through the use of cash from operations, there can be no assurance that NetScout will generate enough cash to do so and also meet its other required or intended cash uses. NetScout’s inability to fund these obligations through cash from operations could require it to seek funding from other sources, including through additional borrowings, which could materially increase NetScout’s outstanding debt or debt service requirements.

Sales of NetScout common stock after the Transactions may negatively affect the market price of NetScout common stock.

The shares of NetScout common stock to be issued in the Transactions to holders of Newco common units will generally be eligible for immediate resale. The market price of NetScout common stock could decline as a result of sales of a large number of shares of NetScout common stock in the market after the consummation of the Transactions or even the perception that these sales could occur.

It is expected that upon completion of the Transactions, pre-First Merger holders of Newco common units and Newco Employees will hold approximately 59.5% of NetScout’s common stock on a fully-diluted basis and

 

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NetScout’s existing equityholders will hold approximately 40.5% of NetScout’s common stock on a fully-diluted basis, subject to potential adjustment under limited circumstances as described in the section of this prospectus entitled “The Merger Agreement—Merger Consideration.” Currently, Danaher stockholders may include index funds that have performance tied to certain stock indices and institutional investors subject to various investing guidelines.

Because NetScout may not be included in these indices following the consummation of the Transactions or may not meet the investing guidelines of some of these institutional investors, these index funds and institutional investors may decide to or may be required to sell the NetScout common stock that they receive in the Transactions. In addition, the investment fiduciaries of Danaher’s defined contribution and defined benefit plans may decide to sell any NetScout common stock that the trusts for these plans receive in the Transactions, or may decide not to participate in the exchange offer, in response to their fiduciary obligations under applicable law. These sales, or the possibility that these sales may occur, may also make it more difficult for NetScout to obtain additional capital by selling equity securities in the future at a time and at a price that it deems appropriate.

The historical financial information of the Communications Business may not be representative of its results or financial condition if it had been operated independently of Danaher and, as a result, may not be a reliable indicator of its future results.

The Communications Business is currently operated by Danaher. Consequently, the financial information of the Communications Business included in this prospectus has been derived from the consolidated financial statements and accounting records of the Communications Business and reflects all direct costs as well as assumptions and allocations made by management of Danaher. The financial position, results of operations and cash flows of the Communications Business presented may be different from those that would have resulted had the Communications Business been operated independently of Danaher during the applicable periods or at the applicable dates. For example, in preparing the financial statements of the Communications Business, Danaher made allocations of costs and Danaher corporate expenses deemed to be attributable to the Communications Business. However, these costs and expenses reflect the costs and expenses attributable to the Communications Business operated as part of a larger organization and do not necessarily reflect costs and expenses that would be incurred by the Communications Business had it been operated independently. As a result, the historical financial information of the Communications Business may not be a reliable indicator of future results.

NetScout’s business, financial condition and results of operations may be adversely affected following the Transactions if NetScout cannot negotiate terms that are as favorable as those Danaher has received when NetScout replaces contracts after the closing of the Transactions.

Prior to consummation of the Transactions, certain functions (such as purchasing, information systems, sales, logistics and distribution) for the Communications Business are generally being performed under centralized systems that will not be transferred to NetScout and, in some cases, under contracts that are also used for Danaher’s other businesses and which are not intended to be assigned to NetScout with the Communications Business. In addition, some other contracts that Danaher or its subsidiaries are a party to on behalf of the Communications Business require consents of third parties to assign them to Newco. While Danaher, under the Transition Services Agreement, will agree to provide NetScout with certain services, there can be no assurance that NetScout will be able to obtain those consents or negotiate terms that are as favorable as those Danaher received when and if NetScout replaces these services with its own agreements for similar services. Although NetScout believes that it will be able to obtain any such consents or enter into new agreements for similar services, it is possible that the failure to obtain consents for or replace a significant number of these agreements for any of these services or to replace them on terms that as are as favorable as those Danaher has received could have a material adverse impact on NetScout’s business, financial condition and results of operations following the Transactions.

 

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Following the exchange of shares of NetScout common stock for Newco common units in the Mergers, the former holders of Newco common units may experience a delay prior to receiving their shares of NetScout common stock or their cash in lieu of fractional shares, if any, if they fail to surrender all necessary documents, duly executed and on a timely basis, to the transfer agent.

Following the exchange of shares of NetScout common stock for Newco common units, the former holders of Newco common units will receive their shares of NetScout common stock or their cash in lieu of fractional shares, if any, only upon surrender of all necessary documents, duly executed and on a timely basis, to the transfer agent. Former holders of Newco common units who fail to surrender all necessary documents, duly executed and on a timely basis, to the transfer agent, may experience a delay prior to receiving their shares of NetScout common stock or their cash in lieu of fractional shares, if any. Until the distribution of the shares of NetScout common stock to the individual stockholder has been completed, the relevant holder of shares of NetScout common stock will not be able to sell its shares of NetScout common stock. Consequently, in case the market price for NetScout common stock should decrease during that period, the relevant stockholder would not be able to stop any losses by selling the shares of NetScout common stock. Similarly, the former holders of Newco common units who received cash in lieu of fractional shares will not be able to invest the cash until the distribution to the relevant stockholder has been completed, and they will not receive interest payments for this time period.

NetScout’s failure to successfully integrate the Communications Business into its business within its expected timetable could adversely affect the combined company’s future results and the market price of NetScout’s common stock following the completion of the Transactions.

The success of the Transactions will depend, in large part, on NetScout’s ability, as a combined company following the completion of the Transactions, to realize the anticipated benefits and on the sales and profitability of the combined company. To realize these anticipated benefits, the combined company must successfully integrate its respective businesses. This integration will be complex and time-consuming. The failure to successfully integrate and manage the challenges presented by the integration process may result in NetScout’s failure to achieve some or all of the anticipated benefits of the Transactions.

Potential difficulties that may be encountered in the integration process include the following:

 

    lost sales and customers as a result of customers of NetScout or the Communications Business deciding not to do business with the combined company;

 

    complexities associated with managing the larger, more complex, combined business;

 

    integrating personnel of NetScout and the Communications Business while maintaining focus on providing consistent, high-quality products and service to customers;

 

    the loss of key employees; and

 

    potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Transactions.

If any of these events were to occur, NetScout’s ability to maintain relationships with customers, channel partners, suppliers and employees or NetScout’s ability to achieve the anticipated benefits of the Transactions could be adversely affected, or could reduce NetScout’s sales or earnings or otherwise adversely affect NetScout’s business and financial results after the Transactions and, as a result, adversely affect the market price of NetScout’s common stock.

 

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The success of the combined company will also depend on relationships with third parties and pre-existing customers and channel partners of NetScout and the Communications Business, which relationships may be affected by customer, channel partner or third-party preferences or public attitudes about the Transactions. Any adverse changes in these relationships could adversely affect the combined company’s business, financial condition or results of operations.

The combined company’s success will depend on NetScout’s ability to maintain and renew relationships with pre-existing customers, channel partners, suppliers, and other third parties of both NetScout and the Communications Business and NetScout’s ability to establish new relationships. There can be no assurance that the business of the combined company will be able to maintain and renew pre-existing contracts and other business relationships, or enter into or maintain new contracts and other business relationships, on acceptable terms, if at all. The failure to maintain important business relationships could have a material adverse effect on NetScout’s business, financial condition or results of operations as a combined company.

The growth of the combined company could suffer if the markets into which the combined company sells its products and services experience cyclicality.

The growth of the combined company will depend in part on the growth of the markets which the Communications Business serves. The Communications Business serves certain industries that have historically been cyclical and have experienced periodic downturns that have had a material adverse impact on demand for the products, software and services that the Communications Business offers. Any of these factors could adversely affect the business, financial condition and results of operations of the combined company in any given period.

Defects, quality issues, inadequate disclosure or misuse with respect to the products, software or services of the combined company could adversely affect the business, reputation and financial statements of the combined company.

Defects in, quality issues with respect to or inadequate disclosure of risks relating to the use of the combined company’s products, software and services, or the misuse of the combined company’s products, software and services, could lead to lost profits and other economic damage, property damage, violation of privacy rights, personal injury or other liability resulting in third-party claims, criminal liability, significant costs, damage to its reputation and loss of business. Any of these factors could adversely affect the business, financial condition and results of operations of the combined company.

International economic, political, legal, compliance and business factors could negatively affect the financial statements and growth of the combined company.

The Communications Business derives significant sales from customers outside the U.S. and certain manufacturing operations, suppliers and employees of the Communications Business are located outside the U.S. The Communications Business expects to continue to increase its sales and presence outside the U.S., particularly in the high-growth markets. The Communications Business’ international business (and particularly its business in high-growth markets) is subject to risks that are customarily encountered in non-U.S. operations, any of which could negatively affect the business, financial condition and results of operations of the combined company.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This prospectus (including information included or incorporated by reference herein) contains certain statements relating to future events and each of Danaher’s, Newco’s and NetScout’s intentions, beliefs, expectations and predictions for the future, including, but not limited to, statements concerning future business conditions and prospects, growth opportunities and estimates of growth, the outlook for each of Danaher’s, Newco’s and NetScout’s business ,the expected benefits of the Transactions, integration plans and expected synergies therefrom and the expected timing of consummation of the Transactions described in this prospectus based upon information currently available. Any such statements, other than statements of historical fact, are forward-looking statements. Wherever possible, these “forward-looking” statements have been identified by words such as “will,” “may,” “anticipates,” “believes,” “intends,” “estimates,” “expects,” “projects,” “plans,” “targets,” “forecasts,” and similar phrases. These forward-looking statements are based upon current assumptions and expectations of each of Danaher’s, Newco’s and NetScout’s management. Such forward-looking statements are subject to risks and uncertainties that could cause each of Danaher’s, Newco’s and NetScout’s actual results, performance and achievements to differ materially from those expressed in, or implied by, these statements included in this document. These risks and uncertainties include risks relating to:

 

    NetScout’s ability to obtain requisite stockholder approval to complete the Transactions;

 

    Danaher being unable to obtain regulatory approvals required to complete the Transactions, or such required approvals delaying the Transactions or resulting in the imposition of conditions that could have a material adverse effect on the combined company or causing the companies to abandon the Transactions;

 

    other conditions to the closing of the Transactions not being satisfied;

 

    a material adverse change, event or occurrence affecting NetScout or the Communications Business prior to the closing of the Transactions delaying the Transactions or causing the companies to abandon the Transactions;

 

    problems arising in successfully integrating the Communications Business and NetScout, which may result in the combined company not operating as effectively and efficiently as expected;

 

    the possibility that the Transactions may involve other unexpected costs, liabilities or delays;

 

    the possibility that there may be delays in consummating the Transactions, or the Transactions may not be consummated at all;

 

    the possibility that the failure to complete the Transactions could adversely affect the market price of Danaher or NetScout common stock as well as each of Danaher’s, Newco’s and NetScout’s business, financial condition and results of operations;

 

    the possibility that if completed, the Transactions may not be successful or achieve their anticipated benefits;

 

    the businesses of each respective company being negatively impacted as a result of uncertainty surrounding the Transactions;

 

    disruptions from the Transactions harming relationships with customers, employees or suppliers;

 

    dependence upon broad-based acceptance of the combined company’s products and services;

 

    the presence of competitors with greater financial resources than the combined company and their strategic response to the combined company’s products;

 

    the possibility that conditions of the capital markets during the periods covered by the forward-looking statements may have an adverse effect on each company’s businesses, financial condition, results of operations and cash flows; and

 

    other risk factors discussed herein and listed from time to time in Danaher’s and NetScout’s public filings with the SEC.

 

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In addition, other factors besides those listed here could adversely affect each of Danaher’s, Newco’s and NetScout’s business and results of operations.

Because forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond each of Danaher’s, Newco’s and NetScout’s control or are subject to change, actual results could be materially different and any or all of these forward-looking statements may turn out to be wrong. Forward-looking statements speak only as of the date made and can be affected by assumptions each of Danaher, Newco and NetScout might make or by known or unknown risks and uncertainties. Many factors mentioned in this prospectus and in Danaher’s and NetScout’s annual and quarterly reports will be important in determining future results. Consequently, none of Danaher, Newco or NetScout can assure you that expectations or forecasts expressed in such forward-looking statements will be achieved. Actual future results may vary materially. Except as required by law, none of Danaher, Newco or NetScout undertakes, and each expressly disclaims, any obligation to update any forward-looking or other statements, whether as a result of new information, future events, or otherwise.

 

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THIS EXCHANGE OFFER

Terms of this Exchange Offer

General

Danaher is offering to exchange all Newco common units that are owned by Danaher for shares of Danaher common stock, at an exchange ratio to be calculated in the manner described below, on the terms and conditions and subject to the limitations described below and in the letter of transmittal (including the instructions thereto) filed as an exhibit to the registration statement of which this prospectus forms a part, by 12:00 midnight, New York City time, on July 8, 2015, unless this exchange offer is extended or terminated. The last day on which tenders will be accepted, whether on July 8, 2015 or any later date to which this exchange offer is extended, is referred to in this prospectus as the “expiration date.” You may tender all, some or none of your shares of Danaher common stock.

Approximately 62,500,000 Newco common units will be held by Danaher upon completion of the Separation, subject to adjustment under certain circumstances. The number of shares of Danaher common stock that will be accepted if this exchange offer is completed will depend on the final exchange ratio, the number of Newco common units offered and the number of shares of Danaher common stock tendered.

Danaher’s obligation to complete this exchange offer is subject to important conditions that are described in the section entitled “—Conditions for Consummation of this Exchange Offer.”

For each share of Danaher common stock that you validly tender in this exchange offer and do not properly withdraw and that is accepted, you will receive a number of Newco common units at a 7% discount to the per-share value of NetScout common stock, calculated as set forth below, subject to an upper limit of 2.2522 Newco common units per share of Danaher common stock. Stated another way, subject to the upper limit described below, for each $100 of Danaher common stock accepted in this exchange offer, you will receive approximately $107.53 of Newco common units.

The final calculated per-share value and per-unit value, as applicable, will be equal to:

 

  1. with respect to Danaher common stock, the simple arithmetic average of the daily VWAP of Danaher common stock on the NYSE for each of the Valuation Dates, as reported by Bloomberg L.P. displayed under the heading Bloomberg VWAP on the Bloomberg page “DHR UN<Equity>AQR” (or its equivalent successor page if such page is not available); and

 

  2. with respect to Newco common units, the simple arithmetic average of the daily VWAP of NetScout common stock on NASDAQ for each of the Valuation Dates, as reported by Bloomberg L.P. displayed under the heading Bloomberg VWAP on the Bloomberg page “NTCT UW<Equity>AQR”(or its equivalent successor page if such page is not available).

The daily VWAP provided by Bloomberg L.P. may be different from other sources of volume–weighted average prices or investors’ or security holders’ own calculations of volume–weighted average prices. Danaher will determine such calculations of the per-share value of Danaher common stock and the per-unit value of Newco common units, and such determination will be final.

If the upper limit on the number of Newco common units that can be received for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the limit and a Mandatory Extension of this exchange offer will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date. See “—Extension; Termination; Amendment—Mandatory Extension.”

 

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Upper Limit

The number of units you can receive is subject to an upper limit of 2.2522 Newco common units for each share of Danaher common stock accepted in this exchange offer. If the upper limit is in effect, a stockholder will receive less than $107.53 of Newco common units for each $100 of Danaher common stock that the stockholder validly tenders, that is not properly withdrawn and that is accepted in the exchange offer, and the stockholder could receive much less. This limit was calculated based on a 10% discount for Newco common units based on the average of the daily VWAPs of Danaher common stock and NetScout common stock on May 8, 2015, May 11, 2015 and May 12, 2015 (the last three trading days ending on the second to last trading day prior to commencement of this exchange offer). Danaher set this limit to ensure that an unusual or unexpected drop in the trading price of NetScout common stock, relative to the trading price of Danaher common stock, would not result in an unduly high number of Newco common units being exchanged for each share of Danaher common stock accepted in this exchange offer.

Pricing Mechanism

The terms of this exchange offer are designed to result in your receiving $107.53 of Newco common units for each $100 of Danaher common stock validly tendered, not properly withdrawn and accepted in this exchange offer based on the calculated per-share and per-unit values described above. This exchange offer does not provide for a minimum exchange ratio because a minimum exchange ratio could result in the Newco common units exchanged for each $100 of Danaher common stock being valued higher than approximately $107.53. Regardless of the final exchange ratio, the terms of this exchange offer would always result in you receiving approximately $107.53 of Newco common units for each $100 of Danaher common stock, so long as the upper limit is not in effect. See the table on page 64 for purposes of illustration.

Subject to the upper limit described above, for each $100 of Danaher common stock accepted in this exchange offer, you will receive approximately $107.53 of Newco common units. The following formula will be used to calculate the number of Newco common units you will receive for shares of Danaher common stock accepted in this exchange offer:

 

Number of Newco

common units

= Number of shares of Danaher common stock tendered and accepted, multiplied by the lesser of: (a) 2.2522 and (b)

100% of the calculated per– share value of Danaher common stock divided by 93% of the calculated per– unit value of Newco common units

(calculated as described below)

The calculated per-share value of a share of Danaher common stock for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of Danaher common stock on the NYSE on each of the Valuation Dates. The calculated per–unit value of a Newco common unit for purposes of this exchange offer will equal the simple arithmetic average of the daily VWAP of NetScout common stock on NASDAQ on each of the Valuation Dates.

To help illustrate the way this calculation works, below are two examples:

Example 1: Assuming that the average of the daily VWAP on the Valuation Dates is $84.30 per share of Danaher common stock and $41.60 per share of NetScout common stock, you would receive 2.1790 ($84.30 divided by 93% of $41.60) Newco common units for each share of Danaher common stock accepted in this exchange offer. In this example, the upper limit of 2.2522 Newco common units for each share of Danaher common stock would not apply.

Example 2: Assuming that the average of the daily VWAP on the Valuation Dates is $95.00 per share of Danaher common stock and $37.00 per share of NetScout common stock, the upper limit would apply and you would only receive 2.2522 Newco common units for each share of Danaher common stock accepted in this exchange offer because the limit is less than 2.7608 ($95.00 divided by 93% of $37.00) Newco common units for each share of

 

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Danaher common stock. Because the upper limit would apply, this exchange offer would be automatically extended until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date, and the exchange ratio would be fixed at the upper limit.

Indicative Per-Share and Per-Unit Values

Indicative exchange ratios, calculated per-share values of Danaher common stock, calculated per-unit values of Newco common units and the final exchange ratio used to determine the number of Newco common units to be exchanged per share of Danaher common stock will be available commencing after the close of trading on the third trading day of the exchange offer by contacting the information agent at the toll-free number provided on the back cover of this prospectus on each day of the exchange offer period prior to the announcement of the final exchange ratio. In addition, a website will be maintained at http://www.danaher.com/netscout that provides indicative exchange ratios, calculated per-share values of Danaher common stock and calculated per-unit values of Newco common units.

From the commencement of this exchange offer until the first Valuation Date, the website will show the indicative calculated per-share and per-unit values, as applicable, calculated as though that day were the expiration date of this exchange offer, of (i) Danaher common stock, which will equal the simple arithmetic average of the daily VWAP of Danaher common stock, as calculated by Danaher, on each of the three prior trading days and (ii) Newco common units, which will equal the simple arithmetic average of the daily VWAP of NetScout common stock, as calculated by Danaher, on each of the three prior trading days.

On each of the Valuation Dates, when the values of Danaher common stock and Newco common units are calculated for the purposes of this exchange offer, the indicative calculated per-share values of Danaher common stock and the indicative calculated per-unit values of Newco common units, as calculated by Danaher, will each equal (i) on the first Valuation Date, the intra–day VWAP during the elapsed portion of that day, (ii) on the second Valuation Date, the intra–day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and (iii) on the third Valuation Date, the intra–day VWAP during the elapsed portion of that day averaged with the actual daily VWAP on the first Valuation Date and with the actual daily VWAP on the second Valuation Date. “Intra–day VWAP” means VWAP for the period beginning at the official open of trading on the NYSE and ending as of the specific time on such day. On each of the Valuation Dates, the indicative calculated per-share and per-unit values and indicative exchange ratio calculated using such values will be updated at 10:30 a.m., 1:30 p.m. and 4:30 p.m. New York City time.

Final Exchange Ratio

The final exchange ratio that shows the number of Newco common units that you will receive for each share of Danaher common stock accepted in this exchange offer will be available at http://www.danaher.com/netscout and announced by press release by 4:30 p.m., New York City time, on July 8, 2015, the expiration date, unless this exchange offer is extended or terminated.

After that time, you may also contact the information agent to obtain the final exchange ratio at its toll–free number provided on the back cover of this prospectus.

Each of the daily VWAPs, intra–day VWAPs, calculated per-share and per-unit values and the final exchange ratio will be rounded to four decimal places.

If Danaher common stock or NetScout common stock does not trade on any of the Valuation Dates, the calculated per-share value of Danaher common stock and the calculated per-unit value of Newco common units will be determined using the daily VWAP of Danaher common stock and NetScout common stock on the preceding trading day or days, as the case may be, on which both Danaher common stock and NetScout common stock did trade.

 

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Since this exchange offer is scheduled to expire at 12:00 midnight, New York City time, on the expiration date, and the final exchange ratio will be announced by 4:30 p.m., New York City time, on the expiration date of this exchange offer, you will be able to tender or withdraw your shares of Danaher common stock after the final exchange ratio is determined. For more information on validly tendering and properly withdrawing your shares, see “—Procedures for Tendering” and “—Withdrawal Rights.”

For the purposes of illustration, the table below indicates the number of Newco common units that you would receive per share of Danaher common stock, calculated on the basis described above and taking into account the limit described above, assuming a range of averages of the daily VWAP of Danaher common stock and NetScout common stock on the Valuation Dates. The first row of the table below shows the indicative calculated per-share value of Danaher common stock, the indicative calculated per-unit value of Newco common units and the indicative exchange ratio that would have been in effect following the official close of trading on the NYSE on May 12, 2015, based on the daily VWAPs of Danaher common stock and NetScout common stock on May 8, 2015, May 11, 2015 and May 12, 2015. The table also shows the effects of a 10% increase or decrease in either or both the calculated per-share value of Danaher common stock and the calculated per-unit value of Newco common units based on changes relative to the values of May 12, 2015.

 

Danaher common stock

  

NetScout common stock

   Calculated per-
share value of
Danaher
common stock(A)
     Calculated per-
unit value

(before the 7%
discount)
of Newco
common units(B)
     Newco
common units
to be received
per share of
Danaher
common stock
tendered (the
exchange
ratio)(C)
     Calculated
Value

Ratio(1)
 

As of May 12, 2015

   As of May 12, 2015    $ 84.2876       $ 41.5824         2.1796         1.08   

Down 10%

   Up 10%    $ 75.8588       $ 45.7406         1.7833         1.08   

Down 10%

   Unchanged    $ 75.8588       $ 41.5824         1.9616         1.08   

Down 10%

   Down 10%    $ 75.8588       $ 37.4241         2.1796         1.08   

Unchanged

   Up 10%    $ 84.2876       $ 45.7406         1.9814         1.08   

Unchanged

   Down 10%(2)(3)    $ 84.2876       $ 37.4241         2.2522         1.00   

Up 10%

   Up 10%    $ 92.7164       $ 45.7406         2.1796         1.08   

Up 10%

   Unchanged(2)(4)    $ 92.7164       $ 41.5824         2.2522         1.01   

Up 10%

   Down 10%(2)(5)    $ 92.7164       $ 37.4241         2.2522         0.91   

 

(1) The Calculated Value Ratio equals (i) the calculated per-unit value of Newco common units (B) multiplied by the exchange ratio (C), divided by (ii) the calculated per-share value of Danaher common stock (A), rounded to the nearest two decimals.
(2) In this scenario, Danaher would announce that the upper limit on the number of Newco common units that can be received for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period no later than 4:30 p.m., New York City time, on the expiration date, the exchange ratio would be fixed at the upper limit and this exchange offer would be extended until 12:00 midnight, New York City time, on the second trading day following the originally scheduled expiration date.
(3) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 2.4218 Newco common units per share of Danaher common stock validly tendered and accepted in this exchange offer. In this scenario, tendering Danaher shareholders would receive less than $100 in value of Newco common units for each $100 in value of Danaher common stock.
(4) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 2.3975 Newco common units per share of Danaher common stock validly tendered and accepted in this exchange offer.
(5) In this scenario, the upper limit is in effect. Absent the upper limit, the exchange ratio would have been 2.6639 Newco common units per share of Danaher common stock validly tendered and accepted in this exchange offer. In this scenario, tendering Danaher shareholders would receive less than $100 in value of Newco common units for each $100 in value of Danaher common stock.

 

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During the three–month period of February 12, 2015 through May 12, 2015, the highest closing price of Danaher common stock on the NYSE was $87.81 and the lowest closing price of NetScout common stock on NASDAQ was $38.41. If the calculated per-share value of Danaher common stock and the calculated per-unit value of Newco common units equaled these closing prices, you would receive only the limit of 2.2522 Newco common units for each share of Danaher common stock tendered, and the value of such Newco common units, based on the NetScout common stock price, would have been approximately $98.52 of Newco common units for each $100 of Danaher common stock accepted for exchange.

If the trading price of Danaher common stock were to increase during the last two trading days prior to the expiration of this exchange offer, the average per-share value of Danaher common stock used to calculate the exchange ratio would likely be lower than the closing price of Danaher common stock on the expiration date of this exchange offer. As a result, you may receive fewer Newco common units and, therefore, effectively fewer shares of NetScout common stock, for each $100 of Danaher common stock than you would have if that per-share value were calculated on the basis of the closing price of Danaher common stock on the expiration date of this exchange offer. Similarly, if the trading price of NetScout common stock were to decrease during the last two trading days prior to the expiration of this exchange offer, the average per-unit value of Newco common units used to calculate the exchange ratio would likely be higher than the closing price of NetScout common stock on the expiration date of this exchange offer. This could also result in your receiving fewer Newco common units and, therefore, effectively fewer shares of NetScout common stock, for each $100 of Danaher common stock than you would otherwise receive if that per–unit value were calculated on the basis of the closing price of NetScout common stock on the expiration date of this exchange offer.

The number of shares of Danaher common stock that may be accepted in this exchange offer may be subject to proration. Depending on the number of shares of Danaher common stock validly tendered, and not properly withdrawn in this exchange offer, and the final exchange ratio, determined as described above, Danaher may have to limit the number of shares of Danaher common stock that it accepts in this exchange offer through a proration process. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described below under “—Proration; Odd-Lots.”

This prospectus and related documents are being sent to persons who directly held shares of Danaher common stock on May 13, 2015 and brokers, banks and similar persons whose names or the names of whose nominees appear on Danaher’s stockholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of Danaher’s common stock.

Proration; Odd-Lots

If, upon the expiration of this exchange offer, Danaher stockholders have validly tendered and not properly withdrawn more shares of Danaher common stock than Danaher is able to accept for exchange (taking into account the exchange ratio and the total number of Newco common units owned by Danaher), Danaher will accept for exchange the Danaher common stock validly tendered and not properly withdrawn by each tendering stockholder on a pro rata basis, based on the proportion that the total number of shares of Danaher common stock to be accepted bears to the total number of shares of Danaher common stock validly tendered and not properly withdrawn (rounded to the nearest whole number of shares of Danaher common stock), and subject to any adjustment necessary to ensure the exchange of all Newco common units being offered by Danaher in this exchange offer, except for tenders of odd–lots, as described below.

Except as otherwise provided in this section, beneficial holders (other than plan participants in the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan) of fewer than 100 shares of Danaher common stock who validly tender all of their shares will not be subject to proration if this exchange offer is oversubscribed. Beneficial holders of 100 or more shares of Danaher common stock are not eligible for this preference.

 

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stock who validly tender all of their shares will not be subject to proration if this exchange offer is oversubscribed. Beneficial holders of 100 or more shares of Danaher common stock are not eligible for this preference.

Any beneficial holder (other than plan participants in the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan) of fewer than 100 shares of Danaher common stock who wishes to tender all of the shares must complete the section entitled “Odd–Lot Shares” on the letter of transmittal. If your odd–lot shares are held by a broker for your account, you can contact your broker and request the preferential treatment.

Danaher will announce the preliminary proration factor for this exchange offer at http://www.danaher.com/netscout and separately by press release promptly after the expiration of the exchange offer. Upon determining the number of shares of Danaher common stock validly tendered for exchange, Danaher will announce the final results, including the final proration factor for this exchange offer.

Any shares of Danaher common stock not accepted for exchange in this exchange offer as a result of proration or otherwise will be returned to the tendering stockholder promptly after the final proration factor for this exchange offer is determined.

For purposes of this exchange offer, a “business day” means any day other than a Saturday, Sunday or U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

Fractional Shares

Following the consummation of the exchange offer, Merger Sub will be merged with and into Newco, whereby Newco will continue as the surviving company and a wholly-owned subsidiary of NetScout. Each outstanding Newco common unit (except Newco common units held by Danaher, Newco, NetScout or Merger Sub) will be converted into the right to receive a number of fully paid and nonassessable shares of NetScout common stock equal to (x) 62.5 million shares of NetScout common stock plus the product of (A) 1.46 multiplied by (B) the number of shares of NetScout common stock issued in any acquisition after the date of the Merger Agreement and prior to the effective time of the First Merger, divided by (y) the aggregate number of Newco common units issued and outstanding as of immediately prior to the effective time of the First Merger. In this conversion of Newco common units into shares of NetScout common stock, no fractional shares of NetScout common stock will be delivered to holders of Newco common units. Instead, holders of Newco common units who would otherwise be entitled to receive a fractional share of NetScout common stock will receive in cash the dollar amount (rounded to the nearest whole cent) determined by multiplying such fraction by the closing price of NetScout common stock on NASDAQ on the last business day prior to the effective time of the First Merger. The amount received by such holders of Newco common units will be net of any required withholding taxes.

Exchange of Shares of Danaher Common Stock

Upon the terms and subject to the conditions of this exchange offer (including, if this exchange offer is extended or amended, the terms and conditions of the extension or amendment), Danaher will accept for exchange and will exchange, for Newco common units owned by Danaher, the Danaher common stock validly tendered, and not properly withdrawn, prior to the expiration of this exchange offer, promptly after the expiration date.

The exchange of Danaher common stock tendered and accepted for exchange pursuant to this exchange offer will be made only after timely receipt by the exchange offer agent of (a) (i) certificates representing all physically tendered shares of Danaher common stock or (ii) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of Danaher common stock in the exchange offer agent’s account at The Depository Trust Company, in each case pursuant to the procedures set forth in the section below entitled “—Procedures for Tendering,” (b) the letter of transmittal

 

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for shares of Danaher common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book–entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

For purposes of this exchange offer, Danaher will be deemed to have accepted for exchange, and thereby exchanged, Danaher common stock validly tendered and not properly withdrawn if and when Danaher notifies the exchange offer agent of its acceptance of the tenders of those shares of Danaher common stock pursuant to this exchange offer.

Upon the consummation of this exchange offer, Danaher will irrevocably deliver to the exchange offer agent a global certificate representing all of the Newco common units being exchanged in this exchange offer, with irrevocable instructions to hold the Newco common units as agent for holders of shares of Danaher common stock validly tendered and not properly withdrawn in the exchange offer and, in the case of a pro rata distribution, if any, Danaher stockholders whose shares of Danaher common stock remain outstanding after the consummation of the exchange offer (as described below under “—Distribution of Newco Common Units Remaining After this Exchange Offer”). NetScout will deposit with the transfer agent for the benefit of persons who received Newco common units in this exchange offer (or in the pro rata distribution, if applicable) certificates or book-entry authorizations representing shares of NetScout common stock, with irrevocable instructions to hold the shares of NetScout common stock as agent for the holders of Newco common units.

Upon surrender of the documents required by the exchange offer agent, duly executed, each former holder of Newco common units will receive from the merger exchange agent in exchange therefor shares of NetScout common stock and/or cash in lieu of fractional shares of NetScout common stock, as the case may be. You will not receive any interest on any cash paid to you, even if there is a delay in making the payment.

If Danaher does not accept for exchange any tendered shares of Danaher common stock for any reason pursuant to the terms and conditions of this exchange offer, the exchange offer agent (a) in the case of shares of Danaher common stock held in certificated form, will return certificates representing such shares without expense to the tendering stockholder and (b) in the case of shares tendered by book-entry transfer pursuant to the procedures set forth below in the section entitled “—Procedures for Tendering,” such shares will be credited to an account maintained within The Depository Trust Company, in each case promptly following expiration or termination of this exchange offer.

Procedures for Tendering

Shares Held in Certificated Form/Book-Entry DRS

If you hold certificates representing shares of Danaher common stock, or if your shares of Danaher common stock are held in book-entry via the DRS, you must deliver to the exchange offer agent a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents. If you hold certificates representing shares of Danaher common stock, you must also deliver to the exchange offer agent the certificates representing the shares of Danaher common stock tendered. The exchange offer agent’s address is listed on the letter of transmittal. Since certificates are not issued for DRS shares, you do not need to deliver any certificates representing those shares to the exchange offer agent.

Shares Held Through a Broker, Dealer, Commercial Bank, Trust Company or Similar Institution

If you hold shares of Danaher common stock through a broker, dealer, commercial bank, trust company or similar institution and wish to tender your shares of Danaher common stock in this exchange offer, you should follow the instructions sent to you separately by that institution. In this case, you should not use a letter of transmittal to direct the tender of your Danaher common stock. If that institution holds shares of Danaher common stock through The Depository Trust Company, it must notify The Depository Trust Company and cause it to transfer the shares into the exchange offer agent’s account in accordance with The Depository Trust

 

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Company’s procedures. The institution must also ensure that the exchange offer agent receives an agent’s message from The Depository Trust Company confirming the book–entry transfer of your Danaher common stock. A tender by book–entry transfer will be completed upon receipt by the exchange offer agent of an agent’s message, book–entry confirmation from The Depository Trust Company and any other required documents.

The term “agent’s message” means a message, transmitted by The Depository Trust Company to, and received by, the exchange offer agent and forming a part of a book–entry confirmation, which states that The Depository Trust Company has received an express acknowledgment from the participant in The Depository Trust Company tendering the shares of Danaher common stock which are the subject of the book–entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal (including the instructions thereto) and that Danaher may enforce that agreement against the participant.

The exchange offer agent will establish an account with respect to the shares of Danaher common stock at The Depository Trust Company for purposes of this exchange offer, and any eligible institution that is a participant in The Depository Trust Company may make book–entry delivery of shares of Danaher common stock by causing The Depository Trust Company to transfer such shares into the exchange offer agent’s account at The Depository Trust Company in accordance with The Depository Trust Company’s procedure for the transfer. Delivery of documents to The Depository Trust Company does not constitute delivery to the exchange offer agent.

Shares Held in the Danaher Stock Fund through the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan

If you hold shares of Danaher common stock in your account under the Danaher Corporation & Subsidiaries Savings Plan, the Danaher Corporation & Subsidiaries Retirement & Savings Plan or the Danaher Corporation & Subsidiaries Puerto Rico Savings Plan, you can elect to either keep your shares of Danaher common stock or exchange some or all of your shares of Danaher common stock for Newco common units. You will receive instructions from the applicable plan record keeper via letter or email informing you how to make an election and the deadline for making an election. If you do not make an active election prior to the applicable deadline, none of the shares of NetScout common stock in your account will be exchanged for Newco common units.

If the offer to exchange shares of Danaher common stock for NetScout common stock is oversubscribed, the number of shares of Danaher common stock that you elect to exchange will be reduced on a pro rata basis. Any proration of the number of shares accepted in this exchange offer will be determined on the basis of the proration mechanics described under “Terms of this Exchange Offer—Proration.” Please contact the phone number in the letter or email you receive from the applicable plan record keeper to speak with a customer service associate if you have not yet received instructions from the plan record keeper.

General Instructions

Do not send letters of transmittal and certificates representing Danaher common stock to Danaher, NetScout, Newco or the information agent. Letters of transmittal for Danaher common stock and certificates representing Danaher common stock should be sent to the exchange offer agent at an address listed on the letter of transmittal. Trustees, executors, administrators, guardians, attorneys–in–fact, officers of corporations or others acting in a fiduciary or representative capacity who sign a letter of transmittal or any certificates or stock powers must indicate the capacity in which they are signing and must submit evidence of their power to act in that capacity unless waived by Danaher.

Whether you tender your Danaher common stock by delivery of certificates or through your broker, the exchange offer agent must receive the letter of transmittal for Danaher common stock and the certificates representing your Danaher common stock at the address set forth on the back cover of this prospectus prior to the expiration of this exchange offer. Alternatively, in case of a book–entry transfer of Danaher common stock

 

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through The Depository Trust Company, the exchange offer agent must receive the agent’s message and a book–entry confirmation prior to such time and date.

Letters of transmittal for Danaher common stock and certificates representing Danaher common stock must be received by the exchange offer agent. Please read carefully the instructions to the letter of transmittal you have been sent. You should contact the information agent if you have any questions regarding tendering your Danaher common stock.

Signature Guarantees

Signatures on all letters of transmittal for Danaher common stock must be guaranteed by a firm which is a member of the Securities Transfer Agents Medallion Program, or by any other “eligible guarantor institution,” as such term is defined in Rule 17Ad–15 under the Exchange Act (each of the foregoing being a “U.S. eligible institution”), except in cases in which shares of Danaher common stock are tendered for the account of a U.S. eligible institution.

If the certificates representing shares of Danaher common stock are registered in the name of a person other than the person who signs the letter of transmittal, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed by an eligible institution.

Guaranteed Delivery Procedures

If you wish to tender shares of Danaher common stock pursuant to this exchange offer but (i) your certificates are not immediately available, (ii) you cannot deliver the shares or other required documents to the exchange offer agent on or before the expiration date of this exchange offer or (iii) you cannot comply with the procedures for book-entry transfer through The Depository Trust Company on a timely basis, you may still tender your Danaher common stock, so long as all of the following conditions are satisfied:

 

    you must make your tender by or through a U.S. eligible institution;

 

    on or before the expiration date, the exchange offer agent must receive a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by Danaher, in the manner provided below; and

 

    within three NYSE trading days after the date of execution of such notice of guaranteed delivery, the exchange offer agent must receive (i) (A) certificates representing all physically tendered shares of Danaher common stock and (B) in the case of shares delivered by book-entry transfer through The Depository Trust Company, confirmation of a book-entry transfer of those shares of Danaher common stock in the exchange offer agent’s account at The Depository Trust Company; (ii) a letter of transmittal for shares of Danaher common stock properly completed and duly executed (including any signature guarantees that may be required) or, in the case of shares delivered by book-entry transfer through The Depository Trust Company, an agent’s message; and (iii) any other required documents.

Registered stockholders (including any participant in The Depository Trust Company whose name appears on a security position listing of The Depository Trust Company as the owner of Danaher common stock) may transmit the notice of guaranteed delivery by facsimile transmission or mail it to the exchange offer agent. If you hold Danaher common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must submit any notice of guaranteed delivery on your behalf.

Tendering Your Shares After the Final Exchange Ratio Has Been Determined

Subject to a Mandatory Extension, the final exchange ratio will be available no later than 4:30 p.m., New York City time, on the expiration date of this exchange offer. If you are a registered stockholder of Danaher

 

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common stock, then it is unlikely that you will be able to deliver an original executed letter of transmittal (and, in the case of certificated shares, your share certificates) to the exchange offer agent prior to the expiration of this exchange offer at 12:00 midnight, New York City time, on the expiration date. Accordingly, in such a case, if you wish to tender your shares after the final exchange ratio has been determined, you will generally need to do so by means of delivering a notice of guaranteed delivery and complying with the guaranteed delivery procedures described above. If you hold Danaher common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must tender your shares on your behalf.

The Depository Trust Company is expected to remain open until 5:00 p.m., New York City time, and institutions may be able to process tenders for Danaher common stock through The Depository Trust Company during that time (although there is no assurance that this will be the case). Once The Depository Trust Company has closed, participants in The Depository Trust Company whose name appears on a Depository Trust Company security position listing as the owner of Danaher common stock will still be able to tender their Danaher common stock by delivering a notice of guaranteed delivery to the exchange offer agent via facsimile.

If you hold Danaher common stock through a broker, dealer, commercial bank, trust company or similar institution, that institution must submit any notice of guaranteed delivery on your behalf. It will generally not be possible to direct such an institution to submit a notice of guaranteed delivery once that institution has closed for the day. Stockholders should consult with the institution through which they hold shares on the procedures that must be complied with and the time by which such procedures must be completed in order for that institution to provide a notice of guaranteed delivery on such holder’s behalf prior to 12:00 midnight, New York City time, on the expiration date. In addition, any such institution, if it is not an eligible institution, will need to obtain a Medallion guarantee from an eligible institution in the form set forth in the applicable notice of guaranteed delivery in connection with the delivery of those shares.

If the upper limit on the number of shares that can be received for each share of Danaher common stock validly tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the limit and a Mandatory Extension of this exchange offer will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date to permit stockholders to tender their Danaher common stock during those days. Any changes in the prices of Danaher common stock or NetScout common stock on those additional days of this exchange offer will not, however, affect the exchange ratio.

Effect of Tenders

A tender of Danaher common stock pursuant to any of the procedures described above will constitute your acceptance of the terms and conditions of this exchange offer as well as your representation and warranty to Danaher that (1) you have the full power and authority to tender, sell, assign and transfer the tendered shares (and any and all other shares of Danaher common stock or other securities issued or issuable in respect of such shares), (2) when the same are accepted for exchange, Danaher will acquire good and unencumbered title to such shares, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims, and (3) you own the shares being tendered within the meaning of Rule 14e–4 promulgated under the Exchange Act.

It is a violation of Rule 14e–4 under the Exchange Act for a person, directly or indirectly, to tender shares of Danaher common stock for such person’s own account unless, at the time of tender, the person so tendering (1) has a net long position equal to or greater than the amount of (a) shares of Danaher common stock tendered or (b) other securities immediately convertible into or exchangeable or exercisable for the shares of Danaher common stock tendered and such person will acquire such shares for tender by conversion, exchange or exercise and (2) will cause such shares to be delivered in accordance with the terms of this prospectus. Rule 14e–4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person.

The exchange of Danaher common stock validly tendered and accepted for exchange pursuant to this exchange offer will be made only after timely receipt by the exchange offer agent of (a) (i) certificates representing all physically tendered shares of Danaher common stock or (ii) in the case of shares delivered by

 

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book–entry transfer through The Depository Trust Company, confirmation of a book–entry transfer of those shares of Danaher common stock in the exchange offer agent’s account at The Depository Trust Company, (b) the letter of transmittal for shares of Danaher common stock, properly completed and duly executed, with any required signature guarantees, or, in the case of a book–entry transfer through The Depository Trust Company, an agent’s message and (c) any other required documents.

Appointment of Attorneys–in–Fact and Proxies

By executing a letter of transmittal as set forth above, you irrevocably appoint Danaher’s designees as your attorneys–in–fact and proxies, each with full power of substitution, to the full extent of your rights with respect to your shares of Danaher common stock tendered and accepted for exchange by Danaher and with respect to any and all other Danaher common stock and other securities issued or issuable in respect of the Danaher common stock on or after the expiration of the exchange offer. That appointment is effective when and only to the extent that Danaher deposits the Newco common units for the shares of Danaher common stock that you have tendered with the exchange offer agent. All such proxies will be considered coupled with an interest in the tendered shares of Danaher common stock and therefore will not be revocable. Upon the effectiveness of such appointment, all prior proxies that you have given will be revoked and you may not give any subsequent proxies (and, if given, they will not be deemed effective). Danaher’s designees will, with respect to the shares of Danaher common stock for which the appointment is effective, be empowered, among other things, to exercise all of your voting and other rights as they, in their sole discretion, deem proper. Danaher reserves the right to require that, in order for shares of Danaher common stock to be deemed validly tendered, immediately upon Danaher’s acceptance for exchange of those shares of Danaher common stock, Danaher must be able to exercise full voting rights with respect to such shares.

Determination of Validity

Danaher will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Danaher common stock, in Danaher’s sole discretion, and its determination will be final and binding. Danaher reserves the absolute right to reject any and all tenders of Danaher common stock that it determines are not in proper form or the acceptance of or exchange for which may, in the opinion of its counsel, be unlawful. In the event a stockholder disagrees with such determination, he or she may seek to challenge such determination in a court of competent jurisdiction. Danaher also reserves the absolute right to waive any of the conditions of this exchange offer, or any defect or irregularity in the tender of any shares of Danaher common stock. No tender of shares of Danaher common stock is valid until all defects and irregularities in tenders of shares of Danaher common stock have been cured or waived. Neither Danaher nor the exchange offer agent, the information agent or any other person is under any duty to give notification of any defects or irregularities in the tender of any shares of Danaher common stock or will incur any liability for failure to give any such notification. Danaher’s interpretation of the terms and conditions of this exchange offer (including the letter of transmittal and instructions thereto) will be final and binding. Notwithstanding the foregoing, Danaher stockholders may challenge any such determination in a court of competent jurisdiction.

Binding Agreement

The tender of Danaher common stock pursuant to any of the procedures described above, together with Danaher’s acceptance for exchange of such shares pursuant to the procedures described above, will constitute a binding agreement between Danaher and you upon the terms of, and subject to, the conditions to this exchange offer.

The method of delivery of share certificates of Danaher common stock and all other required documents, including delivery through The Depository Trust Company, is at your option and risk, and the delivery will be deemed made only when actually received by the exchange offer agent. If delivery is by mail, it is recommended that you use registered mail with return receipt requested, properly insured. In all cases, you should allow sufficient time to ensure timely delivery.

 

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Partial Tenders

If you tender fewer than all the shares of Danaher common stock evidenced by any share certificate you deliver to the exchange offer agent, then you will need to fill in the number of shares that you are tendering in the table on the second page of the letter of transmittal. In those cases, as soon as practicable after the expiration of the exchange offer, the exchange offer agent will credit the remainder of the shares of common stock that were evidenced by the certificate(s) but not tendered to a DRS account in the name of the registered holder maintained by Danaher’s transfer agent. Unless you indicate otherwise in your letter of transmittal, all of the shares of Danaher common stock represented by share certificates you deliver to the exchange offer agent will be deemed to have been validly tendered. No share certificates are expected to be delivered to you, including in respect of any shares delivered to the exchange offer agent that were previously in certificated form, except for share certificates representing shares not accepted in this exchange offer.

Lost, Stolen or Destroyed Certificates

If your certificate(s) representing shares of Danaher common stock have been mutilated, destroyed, lost or stolen and you wish to tender your shares, you may request assistance with the replacement of the certificate(s) by calling Computershare at (800) 546-5141. You may also need to complete an affidavit of lost, stolen or destroyed certificate(s) (that you may request by calling Computershare at (800) 546-5141), post a surety bond for your lost, stolen or destroyed shares of Danaher common stock and pay a service fee. Upon completion of the requirements for replacement of your certificate(s) and upon receipt of the completed applicable letter of transmittal your shares of Danaher common stock will be considered tendered in this exchange offer.

Withdrawal Rights

Shares of Danaher common stock validly tendered pursuant to this exchange offer may be withdrawn at any time before 12:00 midnight, New York City time, on the expiration date and, unless Danaher has previously accepted such shares pursuant to this exchange offer, may also be withdrawn at any time after the expiration of 40 business days from the commencement of this exchange offer. Once Danaher accepts Danaher common stock pursuant to this exchange offer, your tender is irrevocable.

For a withdrawal of shares of Danaher common stock to be effective, the exchange offer agent must receive from you a written notice of withdrawal, in the form made available to you, at one of its addresses or the fax number set forth on the back cover of this prospectus, and your notice must include your name and the number of shares of Danaher common stock to be withdrawn, as well as the name of the registered holder, if it is different from that of the person who tendered those shares.

If certificates have been delivered or otherwise identified to the exchange offer agent, the name of the registered holder and the certificate numbers of the particular certificates evidencing the shares of Danaher common stock must also be furnished to the exchange offer agent, as stated above, prior to the physical release of the certificates. If shares of Danaher common stock have been tendered pursuant to the procedures for book-entry tender discussed in the section entitled “—Procedures for Tendering,” any notice of withdrawal must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with the procedures of The Depository Trust Company.

Danaher will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in its sole discretion, and its decision will be final and binding, subject to the rights of the tendering stockholders to challenge Danaher’s determination in a court of competent jurisdiction. Neither Danaher nor the exchange offer agent, the information agent nor any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification.

 

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Any shares of Danaher common stock properly withdrawn will be deemed not to have been validly tendered for purposes of this exchange offer. However, you may re–tender withdrawn Danaher common stock by following one of the procedures discussed in the section entitled “—Procedures for Tendering” at any time prior to the expiration of this exchange offer (or pursuant to the instructions sent to you separately).

Except for the withdrawal rights described above, any tender made under this exchange offer is irrevocable.

Withdrawing Your Shares After the Close of Business on the Expiration Date

Subject to a Mandatory Extension, the final exchange ratio will be available no later than 4:30 p.m., New York City time, on the expiration date of this exchange offer. If you are a registered stockholder of Danaher common stock (which includes persons holding certificated shares) and you wish to withdraw your shares after the final exchange ratio has been determined, you must deliver a written notice of withdrawal or facsimile transmission notice of withdrawal to the exchange offer agent prior to 12:00 midnight, New York City time, on the expiration date. Medallion guarantees will not be required for such withdrawal notices. If you hold Danaher common stock through a broker, dealer, commercial bank, trust company or similar institution, any notice of withdrawal must be delivered by that institution on your behalf. Stockholders should consult with the institution through which they hold shares on the procedures that must be complied with and the time by which such procedures must be completed in order for that institution to provide a notice of withdrawal on such holder’s behalf prior to 12:00 midnight, New York City time, on the expiration date.

The Depository Trust Company is expected to remain open until 5:00 p.m., New York City time, and institutions may be able to process withdrawals of Danaher common stock through The Depository Trust Company during that time (although there can be no assurance that this will be the case). Once The Depository Trust Company has closed, if you beneficially own shares of Danaher common stock that were previously delivered through The Depository Trust Company, then in order to properly withdraw your shares the institution through which your shares are held must deliver a written notice of withdrawal or facsimile transmission notice of withdrawal to the exchange offer agent prior to 12:00 midnight, New York City time, on the expiration date. Such notice of withdrawal must be in the form of The Depository Trust Company’s notice of withdrawal, must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn shares and must otherwise comply with The Depository Trust Company’s procedures. Shares can be properly withdrawn only if the exchange offer agent receives a withdrawal notice directly from the relevant institution that tendered the shares through The Depository Trust Company.

If the upper limit on the number of Newco common units that can be exchanged for each share of Danaher common stock tendered is in effect at the expiration of the exchange offer period, then the exchange ratio will be fixed at the limit and a Mandatory Extension of this exchange offer will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date, which will permit stockholders to properly withdraw their shares of Danaher common stock during those days.

Book–Entry Accounts

Certificates representing Newco common units will not be issued to holders of shares of Danaher common stock pursuant to this exchange offer. Rather than issuing certificates representing such Newco common units to tendering holders of shares of Danaher common stock, the exchange offer agent will cause Newco common units to be credited to records maintained by the exchange offer agent for the benefit of the respective holders. Following the consummation of the exchange offer, Merger Sub will be merged with and into Newco in the First Merger and each Newco common unit will be converted into the right to receive NetScout common stock and cash in lieu of fractional shares of NetScout common stock. In connection with the exchange offer, you will receive a letter of transmittal and instructions for use in obtaining the NetScout common stock and cash in lieu of fractional shares of NetScout into which your Newco common units held in book-entry accounts are converted. As promptly as practicable following the First Merger and Danaher’s notice and determination of the final proration factor, if any, the merger exchange agent will credit the shares of NetScout common stock into which

 

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the Newco common units have been converted to book-entry accounts maintained for the benefit of the Danaher stockholders who received Newco common units in the exchange offer or as a pro rata spin-off distribution (in the event the exchange offer is not fully subscribed) and will send these holders a statement evidencing their holdings of shares of NetScout common stock.

Extension; Termination; Amendment

Extension, Termination or Amendment by Danaher

Subject to its compliance with the Merger Agreement, Danaher expressly reserves the right, in its sole discretion, at any time and from time to time to extend the period of time during which this exchange offer is open and thereby delay acceptance for payment of, and the payment for, any shares of Danaher common stock validly tendered and not properly withdrawn in this exchange offer. For example, this exchange offer can be extended if any of the conditions for consummation of this exchange offer described in the next section entitled “—Conditions for Consummation of this Exchange Offer” are not satisfied or waived prior to the expiration of this exchange offer.

Subject to its compliance with the Merger Agreement, Danaher expressly reserves the right, in its sole discretion, to amend the terms of this exchange offer in any respect prior to the expiration of the exchange offer, except that Danaher does not intend to extend this exchange offer other than in the circumstances described above.

If Danaher materially changes the terms of or information concerning this exchange offer or if Danaher waives a material condition of this exchange offer, it will extend this exchange offer if required by law. The SEC has stated that, as a general rule, it believes that an offer should remain open for a minimum of five business days from the date that notice of the material change is first given or in the event there is a waiver of a material condition to the exchange offer. The length of time will depend on the particular facts and circumstances.

As required by law, this exchange offer will be extended so that it remains open for a minimum of ten business days following the announcement if:

 

    Danaher changes the method for calculating the number of Newco common units offered in exchange for each share of Danaher common stock; and

 

    this exchange offer is scheduled to expire within ten business days of announcing any such change.

If Danaher extends this exchange offer, is delayed in accepting for exchange any shares of Danaher common stock or is unable to accept for exchange any shares of Danaher common stock under this exchange offer for any reason, then, without affecting Danaher’s rights under this exchange offer, the exchange offer agent may retain all shares of Danaher common stock tendered on Danaher’s behalf. These shares of Danaher common stock may not be withdrawn except as provided in the section entitled “—Withdrawal Rights.”

Danaher’s reservation of the right to delay acceptance of any shares of Danaher common stock is subject to applicable law, which requires that Danaher pay the consideration offered or return the shares of Danaher common stock deposited promptly after the termination or withdrawal of this exchange offer.

Danaher will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day following any extension, amendment, non–acceptance or termination of the previously scheduled expiration date.

Mandatory Extension

Danaher will announce whether the limit on the number of shares that can be received for each share of Danaher common stock tendered is in effect at the last trading day prior to the expiration of the exchange offer period, at http://www.danaher.com/netscout and by press release, no later than 4:30 p.m., New York City time, on the expiration date. If the upper limit is in effect at that time, then the exchange ratio will be fixed at the limit

 

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and a Mandatory Extension will be made until 12:00 midnight, New York City time, on the second trading day following the originally contemplated expiration date to permit stockholders to tender or withdraw their Danaher common stock during those days. Danaher will issue a press release or other public announcement no later than 9:00 a.m., New York City time, on the next business day following any such Mandatory Extension.

Method of Public Announcement

Subject to applicable law (including Rules 13e–4(d), 13e–4(e)(3) and 14e–1 under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with this exchange offer be promptly disclosed to stockholders in a manner reasonably designed to inform them of the change) and without limiting the manner in which Danaher may choose to make any public announcement, Danaher assumes no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to PR Newswire.

Conditions for Consummation of this Exchange Offer

Danaher will not be required to complete and consummate this exchange offer and may extend or terminate this exchange offer, if, at the scheduled expiration of the exchange offer:

 

    the registration statements on Forms S-4 and S-1 of which this prospectus is a part will not have become effective under the Securities Act of 1933 or any stop order suspending the effectiveness of such registration statement has been issued and is in effect;

 

    the shares of NetScout common stock to be issued in the Mergers will not have been authorized for listing on NASDAQ;

 

    less than 90% of the outstanding Newco common units are to be distributed to Danaher stockholders tendering their shares of Danaher common stock in this exchange offer (this condition is referred to in this prospectus as the minimum amount condition);

 

    any condition precedent to the consummation of the Transactions (other than this exchange offer) pursuant to the Merger Agreement has not been fulfilled or waived (except for the conditions precedent that will be fulfilled at the time of the consummation of the Transactions) or for any reason the Transactions (other than this exchange offer) cannot be consummated promptly after consummation of this exchange offer (see “The Merger Agreement—Conditions to the Merger”);

 

    the Merger Agreement or the Distribution Agreement has been terminated;

 

    Danaher has not received the IRS ruling (which IRS ruling has been received);

 

    Danaher and Newco have not received the Tax Opinion from Danaher’s counsel, dated as of the closing date of the First Merger; or

 

    any of the following conditions or events have occurred, or Danaher reasonably expects any of the following conditions or events to occur:

 

    any action, litigation, suit, claim or proceeding is instituted that would be reasonably likely to enjoin, prohibit, restrain, make illegal, make materially more costly or materially delay the consummation of the exchange offer;

 

    any injunction, order, stay, judgment or decree is issued by any court, government, governmental authority or other regulatory or administrative authority having jurisdiction over Danaher, Newco or NetScout and is in effect, or any law, statute, rule, regulation, legislation, interpretation, governmental order or injunction will have been enacted or enforced, any of which would reasonably be likely to restrain, prohibit or delay consummation of this exchange offer;

 

    any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States;

 

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    any extraordinary or material adverse change in U.S. financial markets generally, including, without limitation, a decline of at least 15% in either the Dow Jones Average of Industrial Stocks or the Standard & Poor’s 500 Index within a period of 60 consecutive days or less occurring after May 13, 2015;

 

    a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States;

 

    a commencement of a war (whether declared or undeclared), armed hostilities or other national or international calamity or act of terrorism, directly or indirectly involving the United States, which would reasonably be expected to affect materially and adversely, or to delay materially, the consummation of this exchange offer;

 

    if any of the situations above exist as of the commencement of this exchange offer, any material deterioration of the situation; or

 

    a “market disruption event” (as defined below) occurs with respect to shares of Danaher common stock or NetScout common stock on any of the Valuation Dates and such market disruption event has, in Danaher’s reasonable judgment, impaired the benefits of this exchange offer to Danaher.

If the minimum amount condition is not satisfied due to a low subscription rate in the exchange offer and is not otherwise waived by Danaher, Danaher would instead proceed with a spin-off distribution of the Newco common units to the holders of its common stock. If the upper limit described above is in effect at the expiration of the exchange offer and the minimum amount condition is not satisfied or waived as a result of the low number of tenders of Danaher stockholders, the minimum amount condition would allow Danaher to not consummate the exchange offer, thereby prevent the exchange of Danaher shares by tendering holders who may not have recognized or acted upon the underlying change in the economic benefits of the exchange offer resulting from the upper limit being in effect.

Each of the foregoing conditions to the consummation of the exchange offer is independent of any other condition; the exclusion of any event from a particular condition above does not mean that such event may not be included in another condition.

If any of the above events occurs, Danaher may:

 

    terminate this exchange offer and promptly return all tendered shares of Danaher common stock to tendering stockholders;

 

    extend this exchange offer and, subject to the withdrawal rights described in the section entitled “—Withdrawal Rights,” retain all tendered shares of Danaher common stock until the extended exchange offer expires;

 

    amend the terms of the exchange offer; or

 

    waive or amend any unsatisfied condition and, subject to any requirement to extend the period of time during which this exchange offer is open, complete this exchange offer.

These conditions are for the sole benefit of Danaher. Danaher may assert these conditions with respect to all or any portion of this exchange offer regardless of the circumstances giving rise to them (except any action or inaction by Danaher). Danaher expressly reserves the right, in its sole discretion, to waive any condition in whole or in part at any time prior to the expiration of this exchange offer. Danaher’s failure to exercise its rights under any of the above conditions does not represent a waiver of these rights (provided that the right has not otherwise become exercisable). Each right is an ongoing right which may be asserted at any time prior to the expiration of this exchange offer. All conditions for consummation of this exchange offer must be satisfied or waived by Danaher prior to the expiration of this exchange offer.

A market disruption event with respect to either Danaher common stock or NetScout common stock means a suspension, absence or material limitation of trading of Danaher common stock on the NYSE or NetScout

 

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common stock on NASDAQ for more than two hours of trading or a breakdown or failure in the price and trade reporting systems of the NYSE or NASDAQ, as applicable, as a result of which the reported trading prices for Danaher common stock on the NYSE or NetScout common stock on NASDAQ during any half-hour trading period during the principal trading session in the NYSE or NASDAQ, as applicable, are materially inaccurate, as determined by Danaher or the exchange offer agent in its sole discretion, on the day with respect to which such determination is being made. For purposes of such determination, a limitation on the hours or number of days of trading will not constitute a market disruption event if it results from an announced change in the regular business hours of the NYSE or NASDAQ.

Fees and Expenses

Danaher has retained Georgeson Inc. to act as the information agent and Computershare Trust Company, N.A. to act as the exchange offer agent in connection with this exchange offer. The information agent may contact holders of Danaher common stock by mail, e–mail, telephone, facsimile transmission and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to this exchange offer to beneficial owners. The information agent and the exchange offer agent each will receive reasonable compensation for its respective services, will be reimbursed for reasonable out–of–pocket expenses and will be indemnified against specified liabilities in connection with their services, including liabilities under the federal securities laws.

None of the information agent or the exchange offer agent has been retained to make solicitations or recommendations with respect to this exchange offer. The fees they receive will not be based on the number of shares of Danaher common stock tendered under this exchange offer.

Danaher will not pay any fees or commissions to any broker or dealer or any other person for soliciting tenders of Danaher common stock under this exchange offer. Danaher will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers.

No broker, dealer, bank, trust company or fiduciary will be deemed to be Danaher’s agent or the agent of Newco, the information agent or the exchange offer agent for purposes of this exchange offer.

Legal Limitations

This prospectus is not an offer to buy, sell or exchange and it is not a solicitation of an offer to buy or sell any Newco common units, shares of Danaher common stock or shares of NetScout common stock in any jurisdiction in which the offer, sale or exchange is not permitted. After the consummation of this exchange offer and prior to the First Merger, it will not be possible to trade the Newco common units.

Certain Matters Relating to Non-U.S. Jurisdictions

Countries outside the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. None of Danaher, NetScout or Newco has taken any action under non-U.S. regulations to facilitate a public offer to exchange the shares of Danaher common stock, NetScout common stock or Newco common units outside the United States. Accordingly, the ability of any non-U.S. person to tender shares of Danaher common stock in the exchange offer will depend on whether there is an exemption available under the laws of such person’s home country that would permit the person to participate in the exchange offer without the need for Danaher, NetScout or Newco to take any action to facilitate a public offering in that country or otherwise. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

 

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Non-U.S. stockholders should consult their advisors in considering whether they may participate in the exchange offer in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the shares of Danaher common stock, NetScout common stock or Newco common units that may apply in their home countries. None of Danaher, NetScout or Newco can provide any assurance about whether such limitations may exist.

Distribution of Newco Common Units Remaining After This Exchange Offer

All Newco common units owned by Danaher that are not exchanged in this exchange offer will be distributed as a pro rata distribution to holders of Danaher common stock as of the record date. The record date for the spin-off will be formally announced by press release by Danaher. Any Danaher stockholder who validly tenders (and does not properly withdraw) shares of Danaher common stock for Newco common units in the exchange offer will waive their rights with respect to such shares to receive, and forfeit any rights to, Newco common units distributed on a pro rata basis to Danaher stockholders in the event the exchange offer is not fully subscribed.

Upon consummation of this exchange offer, Danaher will irrevocably deliver to the exchange offer agent a global certificate representing all of the Newco common units being exchanged in this exchange offer, with irrevocable instructions to hold the Newco common units as agent for the holders of shares of Danaher common stock validly tendered and not properly withdrawn in the exchange offer and, in the case of a pro rata distribution, if any, Danaher stockholders whose shares of Danaher common stock remain outstanding after the consummation of the exchange offer. Shares of NetScout common stock will be delivered following the effectiveness of the First Merger, pursuant to the procedures determined by the exchange offer agent and merger exchange agent. See “This Exchange Offer—Terms of this Exchange Offer—Exchange of Shares of Danaher Common Stock.”

If this exchange offer is terminated by Danaher without the exchange of shares, but the conditions for consummation of the Transactions have otherwise been satisfied, Danaher intends to distribute all Newco common units owned by Danaher on a pro rata basis to holders of Danaher common stock, with a record date to be announced by Danaher.

 

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INFORMATION ON NETSCOUT

Overview

NetScout was founded in 1984 and is headquartered in Westford, Massachusetts. NetScout is an industry leader for advanced network, application and service assurance solutions, providing high-quality performance analytics and operational intelligence solutions that facilitate the evolution toward new computing paradigms, such as virtualization, mobility and cloud. NetScout designs, develops, manufactures, markets, licenses, sells and supports these products focused on assuring service delivery quality, performance and availability for some of the world’s largest, most demanding and complex internet protocol (“IP”) based service delivery environments. NetScout manufactures and markets these products in integrated hardware and software solutions that are used by commercial enterprises, large governmental agencies and telecommunication service providers worldwide. NetScout has a single operating segment and substantially all of its identifiable assets are located in the United States.

NetScout’s Business After the Transactions

NetScout believes that the Transactions will help support the following key elements of its growth strategy:

 

    Drive technology innovation. NetScout will continue to invest in research and development, and leverage the strong technical and domain expertise across its organization. As a result of the acquisition of the Communications Business, NetScout’s base of research and development professionals will more than quadruple from its current level of over 350 people and the combined company’s engineering teams will be focused on advancing technical innovation across its broad product portfolio. By capitalizing on NetScout’s extensive experience with global enterprise, service provider and government organizations with IP-based networks, NetScout will be well positioned to cross-leverage its technology development across all major platforms and relevant technologies to address the evolving demands of current and prospective customers. NetScout works closely with its largest enterprise and service provider customers to better understand and address their near-term and longer-term requirements. By better understanding the key, time-sensitive needs of NetScout’s global customer base, NetScout will continue to enhance and extend its product line to meet the increasing challenges of managing a diverse range of services over an increasingly global network environment.

 

    Enable pervasive visibility. NetScout intends to continue to expand its intelligent data source family to enable its customers to achieve greater visibility into more places across their end-to-end network environment. NetScout plans to integrate various capabilities, including its Adaptive Session Intelligence software, across the combined company’s product portfolio to enable wider deployment of NetScout’s technology within virtual computing environments, network devices and computing platforms and to support a broader range of network and application performance management, security and business intelligence requirements. This includes fortifying and enhancing NetScout’s capabilities and technologies by supporting new and innovative ways to address the ongoing challenges associated with the increasing volume of data traffic and enable scalable support for 40 Gigabit, 100 Gigabit topologies and increasing global deployments of IPv6. Advancing these capabilities will enable NetScout to cross-sell a wider range of solutions into NetScout’s existing base of customers using solutions from the Communications Business, as well as increase business with the current base of Communications Business customers by cross-selling NetScout solutions.

 

   

Continued portfolio enhancements. NetScout plans to continue to enhance its products and solutions to address the management challenges associated with virtualization, cloud computing, service-oriented architectures, VoIP, video, and telepresence technologies. In addition, NetScout will continue to drive its solutions to help IT organizations address the challenges of complex service delivery, datacenter consolidation, branch office consolidation and optimization, increasing mobility and the move to a more process-oriented operating environment. The acquisition will add Tektronix Communications’ high-value troubleshooting capabilities, which targets service providers, with Fluke Networks’

 

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troubleshooting capabilities, which targets small to mid-sized enterprises. These capabilities are expected to complement NetScout’s traditional strengths in monitoring large, complex IP-based networks and the mission-critical services that run across them. Over the longer term, NetScout anticipates that the post-acquisition product roadmap integration would support migrating key features and functionalities from various product platforms into new, higher value solutions at more attractive price points that will appeal to a broader range of customers globally.

 

    Extension into adjacent markets. By enhancing and expanding NetScout’s product portfolio, NetScout can also enter complementary adjacent markets that will help it further expand its customer relationships and increase its total addressable market. For example, the acquisition of the Arbor Networks business will bring new security offerings that complement NetScout’s core range of solutions by helping customers identify, mitigate and remediate complex technical threats and unauthorized intrusions into their network and IT infrastructures. The Arbor Networks business will accelerate NetScout’s entry into cyber security with market-leading solutions used by leading service providers and enterprises to prevent and mitigate distributed denial of service (“DDoS”) attacks. In addition, the acquisition will bring new solutions for optimizing the radio access networks (“RANs”) of service providers and sophisticated business intelligence analytics that are used by service providers to increase customer satisfaction, reduce churn, and increase profits.

 

    Leverage NetScout’s direct sales force and pursue cross-selling opportunities. As a result of the acquisition, NetScout will have a larger direct sales force with specialized expertise in targeting the enterprise, service provider and government markets. Each of these markets has different technology issues, challenges and sales cycles. To augment NetScout’s direct sales resources, particularly in key international markets, NetScout plans to leverage relationships with a range of value-added resellers and systems integrators that have historically supported the Tektronix Communications, Arbor Networks and acquired portions of the Fluke Networks Enterprise businesses. These firms possess specialized technical capabilities and local market knowledge, and NetScout believes that they will be important partners to support NetScout following the Transactions. Consequently, NetScout will be very well positioned to better meet the needs of these diverse markets. Additionally, NetScout believes that the Transactions will help create a range of attractive opportunities for the direct sales force to cross-sell various products into NetScout’s customer base. For example, NetScout will seek to leverage its strong relationships with its enterprise customers to accelerate adoption of Arbor Networks’ cyber security solutions and bring additional cyber security solutions to the marketplace that can take advantage of Arbor Networks’ established customer relationships; NetScout also will focus on broadening its relationships with its existing service provider customers by driving sales of the Tektronix Communications’ RAN solutions and cross-selling Tektronix Communications’ business intelligence analytics into new departments.

 

    Increase market relevance and awareness. The acquisition will substantially expand NetScout’s customer base around the world. To generate increased demand for NetScout’s products, NetScout will implement marketing campaigns aimed at promoting its thought leadership and driving lead generation for its technology, products and solutions among both enterprise and service provider customers. In addition, NetScout will continue to drive industry initiatives around managing service delivery.

 

    Extend NetScout’s technology partner alliance ecosystem. Supporting a larger, more global customer base as a result of the acquisition will require alliances with complementary solutions providers. NetScout plans to continue to enhance its technology value, product capabilities and customer relevance through the continued integration of NetScout’s products into technology partner products. This includes both interoperability integration efforts, as well as embedding NetScout’s technology into alliance partner products to gain a more pervasive footprint across both enterprise and service provider networks.

 

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    Pursue strategic acquisitions. Prior to the Transactions, NetScout completed five acquisitions in recent years that helped broaden NetScout’s capabilities, products and technologies, and better position the Company to meet the needs of its customers and prospects. Following the Transactions, NetScout plans to be opportunistic in pursuing strategic acquisitions in order to achieve key business and technology objectives.

 

    Improve cost structure and drive efficiencies. NetScout believes that the Transactions will create a range of opportunities to further improve NetScout’s operating profitability by pursuing cost synergies. NetScout will seek to leverage its purchasing power and extend its proven manufacturing techniques in ways that can improve product gross margin. In addition, NetScout plans to integrate certain operations that have previously been managed separately across various business and product lines. NetScout also expects to achieve synergies by using common infrastructure platforms, and by eliminating or reducing redundancies associated with pre-existing resources, programs and capabilities.

NetScout’s Liquidity and Capital Resources After the Transactions

Overview

NetScout’s principal use of its liquidity and capital for nine months ended December 31, 2014 was to support its operations, including the payment of routine liabilities, to maintain and improve NetScout’s facilities and systems and to pay variable and incentive compensation to its employees. NetScout’s capital deployment priorities included investments in product development as well as a share repurchase program focusing on the repurchase of incremental shares issued in relation to NetScout’s employee stock compensation programs. For the nine months ended December 31, 2014, cash provided by operating activities was approximately $57 million, capital expenditures were approximately $9 million and free cash flow, a non-GAAP measure defined as net cash provided by operating activities less capital expenditures and the purchase of intangible assets, was $48 million. Net cash used in investing activities was approximately $26 million, net cash used in financing activities was approximately $27 million primarily because of share repurchases of approximately $32 million. NetScout’s cash, cash equivalents and marketable securities were approximately $241 million as of December 31, 2014.

For the year ended December 31, 2014, cash provided by the operating activities of the Communications Business was approximately $93 million, capital expenditures were approximately $17 million, and free cash flow (as defined above) was approximately $76 million. Net cash used in investing activities was approximately $17 million and net cash used in financing activities was approximately $76 million, including payments to its parent of approximately $73 million. Danaher has historically provided various services to the Communications Business including cash management and other treasury services. As such, the cash and liquidity is maintained at the Danaher corporate level.

Following the consummation of the Transactions, NetScout expects cash from operating activities to be in the range of $200.0 million to $250.0 million during the first year of the combined operations. Due to the low capital intensive nature of the combined business, NetScout expects that capital expenditures will continue to be less than 5 percent of total combined revenue following the consummation of the Transactions. NetScout expects to incur approximately $11 million of investment banking fees. Due to the ongoing nature of integration planning, there is no estimate of costs associated with achieving any of the projected synergies or the consolidation of any operations and systems as well as professional fees associated with these activities. Additionally, as part of the Merger Agreement, the Communications Business will enter into a Transition Services Agreement with Danaher, under which Danaher will provide the Communications Business specified support services and other assistance for a limited time following the closing of the Transactions. Certain of the services covered under the Transition Services Agreement are costs that are currently included as operating costs in the Communications Business Combined Statements of Earnings, however, there is no guarantee that the Communications Business will not incur higher operating costs than those reflected in those financial statements and NetScout may incur certain costs to replace services at the end of the Transition Services Agreement.

 

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NetScout anticipates that its primary sources of liquidity for working capital and operating activities will be cash provided by operations as well as a financing arrangement which is being reviewed. While NetScout has an existing Revolving Credit Agreement for $250 million that is fully available, NetScout is reviewing alternative financing arrangements including amending the existing facility to cover the requirements of the combined company. NetScout expects these sources of liquidity will be sufficient to fund working capital and capital expenditure requirements, including the significant one-time costs relating to the Transactions described above.

For more information on the Communications Business and NetScout’s existing sources of liquidity, see the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Communications Business” and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in NetScout’s annual report on Form 10-K for the year ended March 31, 2014 and quarterly report on Form 10-Q for the quarters ended June 30, 2014, September 30, 2014 and December 31, 2014, each filed with the SEC and incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

Directors and Officers of NetScout Before and After the Transactions

Board of Directors

The Merger Agreement provides that the NetScout board of directors will take all actions necessary such that, effective as of the effective time of the First Merger, one person selected by Danaher and approved by NetScout will be elected to the NetScout board of directors. NetScout and Danaher currently anticipate that such individual will be James A. Lico, age 48, Danaher’s Executive Vice President. In accordance with the Merger Agreement, this individual will also, subject to the fiduciary duties of NetScout’s board of directors, be nominated for re-election to the board of directors of NetScout at NetScout’s 2015 annual meeting of stockholders. Listed below is the biographical information for each person who is currently a member of the board of directors of NetScout.

Anil Singhal, age 61, co-founded NetScout in June 1984 and has served as NetScout’s Chief Executive Officer and as a director on NetScout’s Board since inception. In January 2007, Mr. Singhal was appointed Chairman of the Board, and has been serving as NetScout’s President, CEO and Chairman since that time. In his current role, Mr. Singhal is focused on providing strategic leadership and vision, as well as setting operational priorities for NetScout’s management team. Mr. Singhal’s vision of “traffic-based instrumentation” has guided NetScout’s product direction and focus for the past three decades, helping to shape the evolution for the industry in the process. Under Mr. Singhal’s leadership, NetScout has grown substantially during the past three decades, completing its initial public offering in 1999 and exceeding $450 million in revenue in fiscal year 2015. He is credited with numerous innovations in the field of network traffic monitoring and analysis that have helped NetScout gain several of industry accolades. During the past decade, Mr. Singhal has also been an instrumental part of a number of strategic acquisitions that have fortified and enhanced NetScout’s technology, customer base and go-to-market capabilities. Mr. Singhal has earned notable recognition for his entrepreneurial success, including the TiE (The Indus Entrepreneur) Boston Lifetime Achievement in 2013, Enterprise Bank’s 2013 George L. Duncan Award of Excellence and Ernst & Young’s New England Entrepreneur of the Year in 1997. Mr. Singhal holds a BSEE from BITS, Pilani, India and an MS in Computer Science from the University of Illinois, Urbana-Champaign.

Victor A. DeMarines, age 78, has been a NetScout director since June 2004. Mr. DeMarines was the President and Chief Executive Officer of MITRE from 1994 until his retirement in 2000. He continued to serve as a member of the Board of Trustees and as Chairman of the Technology Committee of MITRE until his retirement from the Board in 2010. He continues his relationship as a consultant to MITRE Corporation on its Department of Defense, Homeland Security, and cyber activity initiatives. Since February 2013, he has served as the Chairman of the Board of Directors of Verint Systems Inc., a publicly-held provider of systems to the internet security marketplace. He has been a member of the Board of Directors of Verint Systems since 2002 and is also currently a member of its Corporate Governance and Nominating Committee and its Audit Committee.

 

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Robert E. Donahue, age 66, has been a NetScout director since March 2013. He served on the board of directors of Sycamore Networks, Inc., an intelligent optical networking and multiservice access provider, from July 2007 until October 2014. Mr. Donahue served on the board of directors of Cybersource Corporation, a leading provider of electronic payment and risk management solutions, from November 2007 to August 2010. From August 2004 to November 2007, Mr. Donahue served as the President and Chief Executive Officer of Authorize.Net Holdings, Inc. (formerly Lightbridge Inc.), a leading transaction processing company, before it was acquired by Cybersource Corporation in November 2007.

John R. Egan, age 57, has been a NetScout director since October 2000 and serves as NetScout’s Lead Independent Director. Mr. Egan is a founding managing partner of Egan-Managed Capital, L.P., a Boston-based venture capital fund specializing in New England, information technology, and early-stage investments, which began in the fall of 1996, and is a managing partner of Carruth Associates. Since 1992, he has been a member of the Board of Directors and is currently the Chairman of the Mergers and Acquisitions Committee and member of the Finance Committee at EMC Corporation, a publicly-held provider of computer storage systems and software. Since 2007, Mr. Egan has served as a member of the Board of Directors and is currently the Chairman of the Mergers and Acquisitions Committee at VMWare, a publicly-held leader in virtualization and cloud infrastructure. Since 2011, Mr. Egan has served as a member of the Board of Directors and currently serves as Non-Executive Chairman of the Board of Directors and serves on the Compensation Committee at Progress Software Corp., a global software company. Since 2012, Mr. Egan has served as a member of the Board of Directors of Verint Systems, Inc., a publicly-held provider of systems to the internet security market, where he is currently the Chairman of the Corporate Governance and Nominating Committee and a member of the Compensation Committee. Mr. Egan also serves on the Board of Trustees at Boston College and as a director for two other privately held companies.

Joseph G. Hadzima, Jr., age 63, has been a NetScout director since July 1998. Mr. Hadzima has been a Managing Director of Main Street Partners, LLC, a venture capital investing and technology commercialization company, since April 1998. Since 2000, he has also been President of IPVision, Inc., a Main Street Partners portfolio company that provides intellectual property analysis systems and services. Mr. Hadzima is also a Senior Lecturer at MIT Sloan School of Management, of counsel at a law firm, and serves as a director on two private company boards.

Vincent J. Mullarkey, age 67, has been a NetScout director since November 2000. From May 2005 to June 2007, he was a member of the Board of Directors and the Chairman of the Audit Committee of webMethods, Inc., a then publicly-held business process integration software company that was acquired by Software AG in June 2007. Mr. Mullarkey was the Senior Vice President, Finance and Chief Financial Officer of Digital Equipment Corporation from 1994 until his retirement in September 1998.

Christopher Perretta, age 57, has been a NetScout director since September 2014. Mr. Perretta served as Executive Vice President and Chief Information Officer at State Street Corporation since September 2007 and as a member of State Street Corporation’s Management Committee since February 2013. From December 1996 to September 2007, Mr. Perretta served in various roles at General Electric Corporation, including as Chief Information Officer for the North American Consumer Financial Services unit, Chief Technology Officer for General Electric Capital, and most recently, from January 2003 to September 2007, as Chief Information Officer of General Electric Commercial Finance. Mr. Perretta also serves as a member of the board of directors of a privately-held technology company, and the Advanced Cyber Security Center.

Executive Officers

Anil Singhal, age 61, co-founded NetScout in June 1984 and has served as NetScout’s Chief Executive Officer and as a director on NetScout’s Board since inception. In January 2007, Mr. Singhal was appointed Chairman of the Board, and has been serving as NetScout’s President, CEO and Chairman since that time. In his current role, Mr. Singhal is focused on providing strategic leadership and vision, as well as setting operational

 

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priorities for NetScout’s management team. Mr. Singhal’s vision of “traffic-based instrumentation” has guided NetScout’s product direction and focus for the past three decades, helping to shape the evolution for the industry in the process. Under Mr. Singhal’s leadership, NetScout has grown substantially during the past three decades, completing its initial public offering in 1999 and exceeding $450 million in revenue in fiscal year 2015. He is credited with numerous innovations in the field of network traffic monitoring and analysis that have helped NetScout gain several of industry accolades. During the past decade, Mr. Singhal has also been an instrumental part of a number of strategic acquisitions that have fortified and enhanced NetScout’s technology, customer base and go-to-market capabilities. Mr. Singhal has earned notable recognition for his entrepreneurial success, including the TiE (The Indus Entrepreneur) Boston Lifetime Achievement in 2013, Enterprise Bank’s 2013 George L. Duncan Award of Excellence and Ernst & Young’s New England Entrepreneur of the Year in 1997. Mr. Singhal holds a BSEE from BITS, Pilani, India and an MS in Computer Science from the University of Illinois, Urbana-Champaign.

Michael Szabados, age 63, has served as NetScout’s Chief Operating Officer since April 2007. In this role, Mr. Szabados is focused on executing NetScout’s vision and strategy. During his tenure, he has been critical in helping lead NetScout’s key functional areas as NetScout more than doubled in size. Mr. Szabados has also helped lead the integration of Network General and five other companies that NetScout has acquired. His career at NetScout began in 1997 when he joined the company as vice president, marketing, charged with increasing the company’s overall visibility and market awareness. His responsibilities expanded in 2001 to encompass product development, manufacturing and customer support when he was promoted to Senior Vice President, Product Operations. A veteran of the enterprise networking industry, Mr. Szabados held senior leadership roles with companies including UB Networks, SynOptics/Bay Networks and MIPS Corporation following engineering and product management roles at Intel Corporation and later at Apple. Mr. Szabados holds a BSEE from UC Irvine and an MBA from UC Santa Clara.

Jean Bua, age 56, has served as NetScout’s Chief Financial Officer and Treasurer since November 2011. She joined the company in September 2010 as Vice President, Finance, in conjunction with the company’s succession planning. In her current role, Ms. Bua is responsible for investor relations, treasury, financial planning and analysis, real estate development, accounting and compliance. Ms. Bua has played a key role in executing on the financial aspects of NetScout’s strategy during a period in which the company’s market capitalization grew by 300%. During her tenure, NetScout has successfully completed and integrated five acquisitions. Before joining NetScout, Ms. Bua served as Executive Vice President, Finance & Treasurer of American Tower Corporation, a leading provider of infrastructure for the wireless telecommunications industry. While at American Tower, she was a critical contributor to multiple equity and debt financings, and numerous acquisitions that enabled the company to more than double in revenue through both acquisition and organic growth. Prior to American Tower, Ms. Bua spent nine years at Iron Mountain, Inc., concluding as Senior Vice President, Chief Accounting Officer and Worldwide Controller. During her tenure, Iron Mountain successfully consolidated the records management industry and grew from annual revenue of $100 million to over $2 billion through more than 100 domestic and international acquisitions. Previously, she held senior positions at Duracraft Corp. and Keithley Instruments. She was a management consultant at Ernst & Young and an auditor at KPMG. Ms. Bua earned her Bachelor of Science in Business Administration, summa cum laude, from Bryant College and her Masters of Business Administration from the University of Rhode Island.

John W. Downing, age 56, has served as NetScout’s Senior Vice President, Worldwide Sales Operations, since 2007. In this role, Mr. Downing is responsible for directing NetScout’s sales leadership in both the service provider and enterprise markets. Under Mr. Downing’s direction, NetScout has reported strong revenue growth and built vibrant, long-term relationships with leading telecommunications service providers, government agencies and many of the world’s largest corporations. He joined NetScout in 2000 as Vice President, Sales Operations, instituting and refining key go-to-market programs and sales processes that have underpinned the company’s four-fold revenue growth during the past fourteen years. Prior to NetScout, from April 1998 until September 2000, Mr. Downing served as Vice President of Sales at Genrad Corporation, a $300 million manufacturer of electronic testing equipment and production solutions, and was Vice President of North

 

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American Sales from January 1996 until March 1998. Mr. Downing earned a Bachelor of Science in Engineering (BSE) in Computer Science and Applied Mathematics from Tufts University and a Master’s in Business Administration from Suffolk University.

 

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INFORMATION ON DANAHER

Danaher, a Delaware corporation, designs, manufactures and markets professional, medical, industrial and commercial products and services, which are typically characterized by strong brand names, innovative technology and major market positions. Danaher’s research and development, manufacturing, sales, distribution, service and administrative facilities are located in more than 50 countries.

For the 2014 fiscal year, Danaher had net earnings of over $2.59 billion and approximately 71,000 employees employed globally. Danaher’s principal executive offices are located at 2200 Pennsylvania Ave., NW—Suite 800W, Washington, DC 20037 and its telephone number is (202) 828-0850. Danaher’s internet address is http://www.danaher.com. The information on Danaher’s website is not incorporated by reference into or part of this prospectus.

Danaher’s business consists of five segments: Test & Measurement, Environmental, Life Sciences & Diagnostics, Dental and Industrial Technologies.

 

    The Test & Measurement segment is a provider of electronic measurement instruments, professional test tools, thermal imaging and calibration equipment used in electrical, industrial, electronic and calibration applications. The test, measurement and monitoring products are used in electronic design, manufacturing and advanced technology development, network monitoring, management and optimization tools and security solutions for communications and enterprise networks. As discussed in more detail in this prospectus, in October 2014, Danaher entered into an agreement to separate its Communications Business and merge it with a subsidiary of NetScout Systems, Inc.

 

    In the Environmental segment, Danaher’s water quality business is a global leader in water quality analysis and treatment, providing instrumentation and disinfection systems to help analyze and manage the quality of ultra pure water, potable water, wastewater, groundwater and ocean water in residential, commercial, industrial and natural resource applications. Danaher’s retail/commercial petroleum business is a leading worldwide provider of solutions and services focused on fuel dispensing, remote fuel management, point-of-sale systems, payment systems, environmental compliance, vehicle tracking and fleet management.

 

    In the Life Sciences & Diagnostics segment, Danaher’s diagnostics business offers a range of analytical instruments, reagents, consumables, software and services that hospitals, physician’s offices, reference laboratories and other critical care settings use to diagnose disease and make treatment decisions. Danaher’s life sciences business offers a range of research and clinical tools that scientists use to study cells and cell components to understand the causes of disease, identify new therapies and test new drugs and vaccines.

 

    Danaher’s Dental segment provides a range of dental consumables, equipment and services that are used to diagnose, treat and prevent disease and ailments of the teeth, gums and supporting bone, and to improve the aesthetics of the human smile.

 

    Danaher’s Industrial Technologies segment is a provider of equipment, consumables and software for various printing, marking, coding, design and color management applications on consumer and industrial products. The segment is also a global provider of electromechanical motion control solutions for the industrial automation and packaging markets.

For a more detailed description of Danaher’s business, see Danaher’s Annual Report on Form 10-K for the year ended December 31, 2014, which has been filed with the SEC and is incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation By Reference.”

 

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INFORMATION ON THE COMMUNICATIONS BUSINESS

The Company

The Communications Business (also referred to as “we,” “us” or “our” solely for purposes of this section) has been operated as Danaher Corporation’s Communications platform since 2008. Danaher created the Communications platform from the enterprise network performance management and diagnostics business of Fluke Networks Enterprise, which Danaher acquired in 1998, the telecommunications network monitoring, subscriber troubleshooting and diagnostics business of Tektronix, Inc., which Danaher acquired in 2007, the network security solutions business of Arbor Networks, Inc., which Danaher acquired in 2010, as well as from the acquisitions of AirMagnet and Aran Technologies in 2009, VSS Monitoring in 2012 and Newfield Wireless and PacketLoop in 2013. Danaher established its Communications platform primarily to address the market opportunities arising from the convergence of telecommunication and enterprise technologies, which historically had been relatively distinct but have converged as a result of the emergence of internet protocol as the predominant underlying technology for both applications.

Today, the Communications Business is a leading provider of products and solutions used in the design, deployment, monitoring and security of traditional, virtualized, mobile and cloud-based networks operated by communications service providers, hosting service providers, enterprises and government agencies worldwide. We derive revenue principally by developing, manufacturing, and selling a broad range of hardware, software and support services. We maintain operations and conduct business in all major geographies, including North America, Europe, Asia Pacific and Latin America.

Our headquarters is located at 3033 W. President George Bush Highway in Plano, Texas and our telephone number is (469) 330-4000.

Markets, Customers and Products

We design, manufacture, market, license, sell and support innovative hardware and software solutions that help our customers deploy, manage and secure their communication network technologies and services. Communication networks include telecommunication and other service provider networks as well as enterprise networks. Our solutions collect and analyze massive volumes of voice, video and data traffic that traverse communication networks. The data we collect is in the form of “packets” (also known as network data) and “flows” (also known as machine data). These forms of data provide granular detail regarding what is occurring within communication networks, both in real-time and historically. Our solutions allow our customers to analyze the large amount of packets and flows on their communication networks. From these packets and flows our analytics solutions derive contextual and correlated insights about what is occurring at different physical points and times in a network. These insights help our customers to:

 

    improve the quality of their end users’ experience;

 

    monitor the performance of their network infrastructure and the services it delivers;

 

    troubleshoot customer service and operational problems across vast, complex networks;

 

    enable and deliver location-based services for their mobile subscribers; and

 

    detect and mitigate cyber security events in their network, including distributed denial-of-service (“DDoS”) attacks and advanced persistent threats (“APT”).

Our product offerings include the following:

 

    telecommunications network monitoring systems for performance management and troubleshooting;

 

    cyber security detection and mitigation systems for service provider and enterprise networks;

 

    portable enterprise network analysis and optimization tools;

 

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    network packet brokering tools;

 

    enterprise network performance management systems; and

 

    geolocation systems for mobile telecommunications networks.

Our products are configured either as stationary solutions that continuously monitor packet and flow traffic, typically in a live network environment, or as handheld or portable tools used in laboratories and/or live networks to design, deploy or test specific types of equipment, services or points in a network.

Businesses in multiple industry verticals (including wireless and fixed-line communications service providers, hosting service providers, enterprises and governmental agencies) use our solutions to reduce operating expenses and improve the performance and availability of their communication networks. Our broad portfolio of solutions addresses the “end-to-end” needs of large, physically diversified networks: from centralized information technology data centers and network operations centers to the remote access points of networks such as enterprise branch offices and mobile telecommunications “cell towers.”

Sales to the Communications Business’ two largest customers, AT&T and Verizon were 18% and 12%, respectively of total sales in 2014, 25% and 11%, respectively, of total sales in 2013, and 23% and 10%, respectively, of total sales in 2012. No other customer accounted for more than 10% of consolidated sales in 2014, 2013 or 2012.

Our products and solutions are marketed under the AIRMAGNET, ARBOR NETWORKS, FLUKE NETWORKS, TEKTRONIX COMMUNICATIONS and VSS MONITORING brands.

Strategy

We believe there are several key trends driving growth in our served markets, including the:

 

    proliferation of “smart” devices, including mobile phones and machine-to-machine and “Internet of Things” communications;

 

    increasing sophistication of “real-time” communications services requiring superior network performance and availability;

 

    growing prevalence of cyber security attacks (such as DDoS and APT) on network integrity and availability;

 

    new investments in network function virtualization (“NFV”) and software defined networks (“SDN”);

 

    continuing transition of “premise-based” infrastructures and services to “cloud-based” infrastructure and services; and

 

    increasing demand for the extraction of insights from “Big Data” such as the traffic traversing communication networks.

We believe communications service providers, enterprises and government agency network operators worldwide will continue to invest in solutions like ours to address the increasing complexities associated with these trends.

Our strategy is to focus on facilitating the deployment, management and security of our customers’ communication network technologies and services. As our customers migrate to new technologies and services we seek to adapt and enhance our solutions accordingly with the objective of offering a broad, complementary and best-in-class portfolio that addresses our customers’ needs. The initiatives we are pursuing to accomplish this strategy include:

 

    improving the cost-effective, technical scalability of our solutions to address the ever-increasing volumes of traffic customers need to monitor and analyze in real-time;

 

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    migrating our hardware solutions to virtualized formats in a manner that preserves technical performance and financial attractiveness for our customers;

 

    embracing the opportunities presented by the “cloud,” to improve our competitive positioning and expand the size of our addressable market;

 

    re-purposing the contextual and correlated insights we derive from network traffic to serve not only the technical functions of our customers but also the business and marketing functions; and

 

    leveraging our broad footprint in monitoring internet traffic to help our security solutions deployed in customer networks around the world better identify cyber security threats and fortify network defenses.

To accomplish this strategy, we are investing in internal product development, pursuing strategic acquisitions as appropriate to gain access to technology, products, or markets and leveraging our strong industry brands, customer relationships and global distribution channels.

Manufacturing and Materials

Our primary manufacturing activities occur at facilities located in North America. We perform installation and integration activities at customer sites using internal direct labor and third-party integration providers. These installation and integration activities occur primarily at network operator sites located in all of the major geographic regions that we serve.

Our manufacturing operations employ a variety of raw materials that we purchase from independent sources around the world. No single supplier is material, although for some components that require particular specifications or qualifications there may be a single supplier or a limited number of suppliers that can readily provide such components. We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of safety stock, alternative materials and qualification of multiple supply sources. During 2014, we had no raw material shortages that had a material effect on our business.

Sales, Distribution and Backlog

We maintain a direct sales and field maintenance organization, staffed with technically trained personnel throughout the world. Sales to end-customers are made through our direct sales organization and to a lesser extent through independent distributors and resellers located in principal market areas. Our distribution strategy is to align the sales channel with our customer base, concentrating direct selling efforts in large or strategic geographies and markets, and utilizing distributors or other partners to expand geographic and customer reach.

Our unfilled product and service orders were $359,942,000 as of December 31, 2014 and $357,334,000 as of December 31, 2013. A large majority of the unfilled orders are expected to be delivered to customers within one year.

Research and Development

We conduct research and development activities for the purpose of developing new products, enhancing the functionality, effectiveness, ease of use and reliability of our existing products and expanding the applications for which uses of our products are appropriate. Our research and development efforts include internal initiatives and those that use licensed or acquired technology. Research and development activities occur in North America, Asia and Europe. We anticipate that we will continue to make significant expenditures for research and development as we seek to provide a continuing flow of innovative products to maintain and improve our competitive position. Expenditures for research and development during fiscal years 2014, 2013 and 2012 were $159,554,000, $147,553,000 and $130,872,000, respectively. Customer-sponsored research and development was not significant in 2014, 2013 or 2012.

 

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Seasonality

General economic conditions impact our business and financial results, but we are not subject to material seasonality.

Competition

Our primary competitors include Astellia SA, Empirix Inc., FireEye Inc., Gigamon, Inc., International Business Machines Corporation, Ixia, JDS Uniphase Corporation, NetScout, Polystar, Riverbed Technology, Inc., network equipment manufacturers (“NEMs”) and various in-house solutions. We encounter a variety of competitors, including well-established regional competitors, competitors who are more specialized than we are in particular markets, as well as larger companies or divisions of larger companies with substantial sales, marketing, research, and financial capabilities. We are facing increased competition in a number of our served markets as a result of the entry of new, large companies into certain markets, the entry of competitors based in low-cost manufacturing locations, and increasing consolidation in particular markets. Our management believes that we have a market leadership position in many of the markets we serve. Key competitive factors vary among our product and service lines, but include product scalability and performance, technology and product availability, price, quality, delivery speed, service and support, innovation, distribution network and brand name recognition.

Intellectual Property

We own numerous patents along with trademarks, copyrights, trade secrets and licenses to intellectual property owned by others. Although in aggregate our intellectual property is important to our operations, we do not consider any single patent, trademark, copyright, trade secret or license to be of material importance to our business. From time to time we engage in litigation to protect our intellectual property rights.

Working Capital

We maintain an adequate level of working capital to support our business needs. There are no unusual industry practices or requirements relating to working capital items. In addition, our sales and payment terms are generally similar to those of our competitors.

Employee Relations

As of December 31, 2014, we employed approximately 2,160 persons, of whom approximately 1,370 were employed in the United States and approximately 790 were employed outside of the United States. In the United States we do not have any hourly-rated, unionized employees. Outside the United States, we have government-mandated collective bargaining arrangements and union contracts in certain countries.

Regulatory Matters

We face government regulation both within and outside the United States relating to the development, manufacture, marketing, sale and distribution of our products, software and services. The following sections describe certain significant regulations that we are subject to. These are not the only regulations that our businesses must comply with.

Environmental, Health and Safety Laws and Regulations

Our operations, products and services are subject to environmental laws and regulations in the jurisdictions in which they operate, which impose limitations on the discharge of pollutants into the environment and establish standards for the generation, use, treatment, storage and disposal of hazardous and non-hazardous wastes. We must also comply with various health and safety regulations in both the United States and abroad in connection with our operations. Compliance with these laws and regulations has not had and, based on current information and the applicable laws and regulations currently in effect, is not expected to have a material effect on our capital expenditures, earnings or competitive position, and we do not anticipate material capital expenditures for environmental control facilities.

 

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Export/Import Compliance

We are required to comply with various U.S. export/import control and economic sanctions laws, including: (1) the Export Administration Regulations administered by the U.S. Department of Commerce, Bureau of Industry and Security, which, among other things, impose licensing requirements on the export or re-export of certain dual-use goods, technology and software (which are items that potentially have both commercial and military applications); (2) the regulations administered by the U.S. Department of Treasury, Office of Foreign Assets Control, which implement economic sanctions imposed against designated countries, governments and persons based on United States foreign policy and national security considerations; and (3) the import regulatory activities of the U.S. Customs and Border Protection. Other nations’ governments have implemented similar export and import control regulations, which may affect our operations or transactions subject to their jurisdictions.

International Operations

Our products, software and services are available worldwide, and our principal markets outside the United States are in Europe, Asia and Latin America. We believe that our future growth depends in part on our ability to continue developing products and sales models that successfully target emerging markets. Annual revenue derived from customers outside the United States (based on geographic destination) as a percentage of total annual revenue was 44% in 2014, 41% in 2013 and 42% in 2012. Long-lived assets located outside the United States as a percentage of total long-lived assets as of December 31, 2014, 2013 and 2012 were 7%, 8% and 8%, respectively.

The manner in which our products and services are sold outside the United States differs by product and by region. Most of our sales in non-U.S. markets are made directly from the U.S., but we also sell products through various representatives and distributors. In countries with low sales volumes, we often sell through representatives and distributors as well as other partners such as third party system integrators. Financial information about our international operations is contained in Note 15 of the Communications Business’ Combined Financial Statements for the year ended December 31, 2014.

Properties

Our headquarters is located in Plano, Texas. The following is a summary of our significant operating locations.

 

Location

  

Own/Lease

  

Functional Use

Plano, Texas

   Own1    R&D, service, manufacturing and administrative

Ann Arbor, Michigan

   Lease    R&D and service

Burlington, Massachusetts

   Lease    R&D, service, manufacturing and administrative

Atlanta, Georgia

   Lease    R&D

Berlin, Germany

   Lease    R&D and manufacturing

Frankfurt, Germany

   Lease    Service and administrative

Dublin, Ireland

   Lease    R&D, manufacturing and administrative

Padova, Italy

   Lease    R&D

Shanghai, China

   Lease    R&D

Sunnyvale, California

   Lease    R&D, manufacturing and administrative

Berkeley, California

   Lease    R&D and administrative

Colorado Springs, Colorado

   Lease    R&D and administrative

Santa Clara, California

   Lease    R&D and administrative

Beijing, China

   Lease    R&D

Rockville, Maryland

   Lease    Sales and service

 

1  As of the closing of the distribution of the Communications Business, the ownership of this facility will be transferred to Danaher or a subsidiary of Danaher and leased to NetScout or a subsidiary of NetScout.

 

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Legal Proceedings

We are, from time to time, subject to a variety of litigation and other legal and regulatory proceedings incidental to its business. Based upon our experience, current information and applicable law, we do not believe it is reasonably possible that these proceedings and claims will have a material effect on our financial statements.

 

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HISTORICAL MARKET PRICE DATA AND DIVIDEND INFORMATION

Comparative Historical and Pro Forma Per Share Data

The following table sets forth certain historical and pro forma per share data for NetScout. The NetScout historical data has been derived from and should be read together with NetScout’s audited consolidated financial statements and related notes thereto contained in NetScout’s annual report on Form 10-K for the fiscal year ended March 31, 2014, and NetScout’s unaudited consolidated financial statements and related notes thereto contained in NetScout’s quarterly report on Form 10-Q for the period ended December 31, 2014, each of which are incorporated by reference into this prospectus. The pro forma data has been derived from the unaudited pro forma combined financial statements of NetScout and the Communications Business included elsewhere in this prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

This comparative historical and pro forma per share data is being presented for illustrative purposes only. NetScout and the Communications Business may have performed differently had the Transactions occurred prior to the periods or at the date presented. You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had NetScout and the Communications Business been combined during the periods or at the date presented or of the actual future results or financial condition of NetScout or the Communications Business to be achieved following the Transactions.

 

     As of and for the
Nine Months Ended
December 31, 2014
     As of and for the
Year Ended
March 31, 2014
 
(shares in thousands)    Historical      Pro Forma      Historical      Pro Forma  

Basic earnings per share

   $ 0.98       $ 0.05       $ 1.19       $ 0.56   

Diluted earnings per share

   $ 0.97       $ 0.05       $ 1.17       $ 0.56   

Weighted average common shares outstanding—Basic

     41,128         103,628         41,366         103,866   

Weighted average common shares outstanding—Diluted

     41,679         104,211         41,955         104,497   

Book value per share of common stock

   $
10.48
  
   $ 30.03       $
9.94
  
     Not available   

Historical Common Stock Market Price and Dividend Data

Historical market price data for Newco has not been presented because the Communications Business is currently operated by Danaher and there is no established trading market in Newco common units. Shares of Newco common units do not currently trade separately from Danaher common stock.

Shares of Danaher common stock currently trade on the NYSE under the symbol “DHR.” On October 10, 2014, the last trading day before the announcement of the Transactions, the last sale price of Danaher’s common stock reported by the NYSE was $71.86. On May 12, 2015, the last sale price of Danaher common stock reported by the NYSE was $86.00.

Shares of NetScout common stock currently trade on NASDAQ under the symbol “NTCT.” On October 10, 2014, the last trading day before the announcement of the Transactions, the last sale price of NetScout’s common stock reported by NASDAQ was $41.91. On May 12, 2015, the last sale price of NetScout common stock reported by NASDAQ was $41.13.

 

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The following table sets forth, for the periods indicated, the high and low sales prices per share of Danaher common stock, as reported on the NYSE, and NetScout common stock, as reported on NASDAQ. In addition, the table also sets forth the quarterly cash dividends per share declared by Danaher with respect to Danaher common stock.

 

     Danaher
Per Share

Dividends
    Danaher
Common Stock
     NetScout Common Stock  
       High      Low          High              Low      

Calendar Year Ending December 31, 20151

             

First Calendar Quarter

   $ 0.135      $ 88.10       $ 81.25       $ 44.76       $ 33.53   

Second Calendar Quarter (through May 12, 2015)

   $ —        $ 86.35       $ 81.59       $ 45.53       $ 39.32   

Calendar Year Ending December 31, 2014

             

First Calendar Quarter

   $ 0.10      $ 78.80       $ 71.89       $ 39.10       $ 28.64   

Second Calendar Quarter

   $ 0.10      $ 81.14       $ 71.75       $ 44.54       $ 33.30   

Third Calendar Quarter

   $ 0.10      $ 80.00       $ 73.02       $ 48.13       $ 41.15   

Fourth Calendar Quarter

   $ 0.10      $ 87.49       $ 70.12       $ 46.17       $ 31.59   

Calendar Year Ended December 31, 2013

             

First Calendar Quarter

   $ —   2    $ 62.90       $ 56.17       $ 28.28       $ 23.74   

Second Calendar Quarter

   $ 0.025      $ 64.80       $ 57.61       $ 24.92       $ 21.22   

Third Calendar Quarter

   $ 0.025      $ 70.94       $ 63.16       $ 27.55       $ 23.22   

Fourth Calendar Quarter

   $ 0.025      $ 77.39       $ 66.83       $ 30.76       $ 24.04   

 

1  In order to present the market price and dividend information for Danaher and NetScout on a comparable basis, the information included in the above table is presented for the calendar years and calendar quarters shown rather than the fiscal years and fiscal quarters of Danaher and NetScout.

 

2  Danaher did not make cash payments for dividends during the first quarter of 2013 because Danaher’s board of directors had determined to accelerate the quarterly dividend payment that normally would have been paid in January 2013 and paid it in December 2012.

NetScout Dividend Policy

NetScout currently intends to retain its future earnings, if any, to finance the development and expansion of its business and is limited in its ability to pay cash dividends under the terms of its current credit facility. Therefore, NetScout does not intend to pay cash dividends on its common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of NetScout’s board of directors and will depend on NetScout’s financial condition, results of operations and capital requirements, restrictions contained in any financing instruments and such other factors as the NetScout board of directors deems relevant.

Danaher Dividend Policy

Declarations of dividends on Danaher’s common stock are made at the discretion of Danaher’s board of directors. Among other things, Danaher’s board of directors evaluates business conditions and earnings. In February 2015, Danaher’s board of directors declared a dividend of $0.135, an increase from the $0.10 dividend which was declared each quarter during 2014. Aggregate cash payments for dividends during 2014, 2013, and 2012 were $227.7 million, $52.1 million, and $86.4 million, respectively.

 

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SELECTED FINANCIAL STATEMENT DATA

Selected Historical Combined Financial Data of the Communications Business

Newco is a newly-formed holding company organized for the purpose of holding the Communications Business and consummating the Transactions with NetScout. The following data, insofar as it relates to each of the years 2012 through 2014, has been derived from audited annual financial statements, including the combined balance sheets at December 31, 2014 and December 31, 2013 and the related combined statements of earnings for each of the three years in the period ended December 31, 2014 and notes thereto appearing elsewhere herein. The data as of December 31, 2012 and for the year ended December 31, 2011 has been derived from audited combined financial statements not included or incorporated by reference in this document. The data as of December 31, 2011 and 2010 and for the year ended December 31, 2010 has been derived from unaudited combined financial information not included or incorporated by reference into this document. This information is only a summary and you should read the table below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Communications Business” and the financial statements of the Communications Business and the notes thereto included elsewhere in this document ($ in thousands).

 

    As of and for the Year Ended December 31  
    2014     2013     2012     2011     2010  

Sales

         

Product

  $ 535,281      $ 623,632      $ 594,770      $ 483,782      $ 367,141   

Service

    224,942        211,259        190,968        185,497        121,204   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total sales

$ 760,223    $ 834,891    $ 785,738    $ 669,279    $ 488,345   

Earnings before income taxes

  62,335      116,598      157,881      106,722      43,707   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings

  42,552      83,806      103,798      74,371      28,028   

Total assets

$ 1,238,829    $ 1,235,903    $ 1,185,543    $ 998,760    $ 1,047,998   

 

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Selected Historical Consolidated Financial Data of Danaher

The following selected historical consolidated financial data of Danaher as of and for each of the years in the five-year period ended December 31, 2014 has been derived from the audited consolidated financial statements of Danaher. This information is only a summary and should be read in conjunction with the financial statements of Danaher and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in Danaher’s Annual Report on Form 10-K for the year ended December 31, 2014, which is incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation By Reference.”

 

     As of and for the
Year Ended December 31
 
     2014      2013      2012      2011      2010  
     (In millions, except per share data and ratio data)  

Statement of Earnings Data

              

Sales

   $ 19,913.8       $ 19,118.0       $ 18,260.4       $ 16,090.5       $ 12,550.0   

Operating profit (1)

     3,431.3         3,274.9         3,165.1         2,617.2         2,049.6   

Net earnings from continuing operations

     2,598.4         2,695.0         2,299.3         1,935.3         1,718.2   

Earnings from discontinued operations, net of income taxes

     —           —           92.9         237.0         74.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings

$ 2,598.4    $ 2,695.0    $ 2,392.2    $ 2,172.3    $ 1,793.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings per share from continuing operations:

Basic

$ 3.70    $ 3.87    $ 3.32    $ 2.86    $ 2.63   

Diluted

$ 3.63    $ 3.80    $ 3.23    $ 2.77    $ 2.53   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings per share from discontinued operations:

Basic

$ —      $ —      $ 0.13    $ 0.35    $ 0.11   

Diluted

$ —      $ —      $ 0.13    $ 0.34    $ 0.11   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings per share:

Basic

$ 3.70    $ 3.87    $ 3.45    $ 3.21    $ 2.74   

Diluted

$ 3.63    $ 3.80    $ 3.36    $ 3.11    $ 2.64   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Dividends declared per share

$ 0.40    $ 0.10    $ 0.10    $ 0.09    $ 0.08   

Total assets

$ 36,991.7    $ 34,672.2    $ 32,941.0    $ 29,949.5    $ 22,217.1   

Total debt

$ 3,473.4    $ 3,499.0    $ 5,343.1    $ 5,305.2    $ 2,824.7   

Ratio of Earnings to Fixed Charges (2)

  25.6      22.6      17.6      16.0      15.5   

 

(1) This term is distinct from the term “Operating Profit” as defined in the section of this prospectus entitled “Helpful Information” because the definition of “Operating Profit” in such section is specific to the Communications Business.
(2) These ratios include Danaher Corporation and its consolidated subsidiaries. The ratio of earnings to fixed charges was computed by dividing earnings by fixed charges for the periods indicated, where “earnings” consist of (1) earnings (excluding earnings from equity investees) before income taxes plus distributed income of equity investees; plus (2) fixed charges, and “fixed charges” consist of (A) interest, whether expensed or capitalized, on all indebtedness, (B) amortization of premiums, discounts and capitalized expenses related to indebtedness, and (C) an interest component representing the estimated portion of rental expense that management believes is attributable to interest. Interest on unrecognized tax benefits is included in the tax provision in the Company’s Consolidated Condensed Statements of Earnings and is excluded from the computation of fixed charges.

 

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Selected Historical Consolidated Financial Data of NetScout

The following selected historical consolidated financial data of NetScout for the years ended March 31, 2014, 2013 and 2012, and as of March 31, 2014 and 2013, has been derived from NetScout’s audited consolidated financial statements, which are incorporated by reference into this prospectus. The following selected financial data as of and for the years ended March 31, 2011 and 2010 has been derived from NetScout’s audited historical consolidated financial statements, which are not included or incorporated by reference into this prospectus. The following selected historical consolidated financial data as of and for the nine-month periods ended December 31, 2014 and 2013 has been derived from the unaudited consolidated financial statements of NetScout, which are incorporated by reference in this prospectus. The selected historical consolidated financial data presented below is not necessarily indicative of the results or financial condition that may be expected for any future period or date. This information is only a summary and should be read in conjunction with the financial statements of NetScout and the notes thereto and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in NetScout’s annual report on Form 10-K for the year ended March 31, 2014 and quarterly report on Form 10-Q for the period ended December 31, 2014, each of which is incorporated by reference into this prospectus. See “Where You Can Find More Information; Incorporation by Reference.”

 

    As of and for the Nine
Months Ended
December 31,
    As of and for the
Year Ended March 31,
 
    2014     2013     2014     2013     2012     2011     2010  
    (In thousands, except for share data)  

Results of Operations:

         

Revenue:

         

Product

  $ 198,765      $ 163,895      $ 234,268      $ 198,749      $ 168,141      $ 159,948      $ 142,113   

Service

    135,519        120,435        162,379        151,801        140,538        130,592        118,229   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  334,284      284,330      396,647      350,550      308,679      290,540      260,342   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue:

Product

  45,015      36,117      51,219      45,752      39,271      38,175      35,564   

Service

  26,158      24,111      33,294      28,256      26,401      23,186      20,500   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

  71,173      60,228      84,513      74,008      65,672      61,361      56,064   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

  263,111      224,102      312,134      276,542      243,007      229,179      204,278   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

Research and development

  56,872      50,951      70,454      61,546      49,478      40,628      36,650   

Sales and marketing

  104,304      96,184      129,611      116,807      109,624      105,271      99,059   

General and administrative

  33,211      22,367      30,623      29,718      27,488      23,308      20,609   

Amortization of acquired intangible assets

  2,539      2,571      3,432      2,877      2,131      1,907      2,057   

Restructuring charges

  —        —        —        1,065      603      —        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

  196,926      172,073      234,120      212,013      189,324      171,114      158,375   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

  66,185      52,029      78,014      64,529      53,683      58,065      45,903   

Interest and other expense, net

  (1,186   (88   (158   (793   (2,765   (1,772   (2,832
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax expense

  64,999      51,941      77,856      63,736      50,918      56,293      43,071   

Income tax expense

  24,661      19,511      28,750      23,127      18,490      19,028      15,154   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

$ 40,338    $ 32,430    $ 49,106    $ 40,609    $ 32,428    $ 37,265    $ 27,917   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic net income per share

$ 0.98    $ 0.78    $ 1.19    $ 0.97    $ 0.77    $ 0.89    $ 0.69   

Diluted net income per share

$ 0.97    $ 0.77    $ 1.17    $ 0.96    $ 0.76    $ 0.87    $ 0.67   

Financial highlights:

Cash, cash equivalents and short and long-term marketable securities

$ 240,726    $ 182,213    $ 218,794    $ 154,091    $ 213,516    $ 228,478    $ 170,551   

Total assets

$ 638,928    $ 577,877    $ 607,763    $ 552,176    $ 567,757    $ 527,570    $ 482,601   

Debt

$ —      $ —      $ —      $ —      $ 62,000    $ 68,106    $ 79,356   

Total stockholder’s equity

$ 432,118    $ 395,598    $ 409,161    $ 371,903    $ 342,369    $ 319,559    $ 266,843   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    As of and for the Nine
Months Ended

December 31,
    As of and for the
Year Ended March 31,
 
    2014     2013     2014     2013     2012     2011     2010  
    (In thousands, except for share data)  

Cash flow data:

         

Cash from operating activities

  $ 57,322      $ 60,767      $ 110,946      $ 95,412      $ 68,307      $ 67,189      $ 45,654   

Purchases of fixed assets

  $ (8,630   $ (8,709   $ (13,066   $ (11,671   $ (11,088   $ (7,491   $ (5,242

Purchases of intangible assets

  $ (131   $ (713   $ (1,086   $ (277   $ (200     —          —     

Non-GAAP free cash flow(1)

  $ 48,561      $ 51,345      $ 96,794      $ 83,464      $ 57,019      $ 59,698      $ 40,412   

Other Selected Data:

         

Weighted average common shares outstanding-basic

    41,128        41,417        41,366        41,665        42,035        42,059        40,691   

Weighted average common shares outstanding-diluted

    41,679        41,969        41,955        42,322        42,750        42,973        41,915   

Non-GAAP revenue(1)

  $ 334,302      $ 284,749      $ 397,205      $ 351,765      $ 308,991      $ 289,743      $ 261,659   

Non-GAAP net income(1)

  $ 56,445      $ 43,992      $ 64,218      $ 56,014      $ 46,970      $ 44,881      $ 35,859   

Non-GAAP net income per share(1)

  $ 1.35      $ 1.05      $ 1.53      $ 1.32      $ 1.10      $ 1.04      $ 0.86   

 

(1) NetScout supplements the GAAP financial measures NetScout reports in quarterly and annual earnings announcements, investor presentations and other investor communications by reporting the following non-GAAP measures: non-GAAP revenue, non-GAAP net income, non-GAAP free cash flow and non-GAAP net income per diluted share. Non-GAAP revenue eliminates the GAAP effects of acquisitions by adding back revenue related to deferred revenue revaluation, and, for the fiscal year ended March 31, 2011, eliminates the revenue impact of recently adopted accounting guidance. Non-GAAP net income includes the foregoing adjustment and also removes expenses related to the amortization of acquired intangible assets, share-based compensation, restructuring, certain expenses relating to acquisitions including compensation for post-combination services, business development charges and loss on early extinguishment of debt, net of related income tax effects. Non-GAAP diluted net income per share also excludes these expenses as well as the related impact of all these adjustments on the provision for income taxes. Non-GAAP free cash flow is operating cash flow less cash outflows for PP&E and intangibles.

These non-GAAP measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP (revenue, net income and diluted net income per share), and may have limitations in that they do not reflect all our results of operations as determined in accordance with GAAP. These non-GAAP measures should only be used to evaluate our results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from, or as a substitute for results prepared in accordance with GAAP.

NetScout’s management believes these non-GAAP financial measures enhance the reader’s overall understanding of NetScout’s current financial performance and its prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how NetScout plans and measures its business. NetScout believes that providing these non-GAAP measures affords investors a view of NetScout’s operating results that may be more easily compared to its peer companies and also enables investors to consider NetScout’s operating results on both a GAAP and non-GAAP basis during and following the integration period of NetScout’s acquisitions. Presenting the GAAP measures on their own may not be indicative of our core operating results. Furthermore, NetScout’s management believes that the presentation of non-GAAP measures when shown in conjunction with the corresponding GAAP measures provide useful information to management and investors regarding present and future business trends relating to NetScout’s financial condition and results of operations.

 

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The following table reconciles revenue, net income and net income per share on a GAAP and non-GAAP basis (in thousands, except for per share amounts):

 

    Nine Months Ended
December 31,
    Year ended March 31,  
    2014     2013     2014     2013     2012     2011     2010  

GAAP revenue

  $ 334,284      $ 284,330      $ 396,647      $ 350,550      $ 308,679      $ 290,540      $ 260,342   

Revenue adjustments

    18        419        558        1,215        312        (797     1,317   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP revenue

$ 334,302    $ 284,749    $ 397,205    $ 351,765    $ 308,991    $ 289,743    $ 261,659   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP net income

$ 40,338    $ 32,430    $ 49,106    $ 40,609    $ 32,428    $ 37,265    $ 27,917   

Revenue adjustments

  18      419      558      1,215      312      (797   1,317   

Inventory fair value amortization

  —        —        —        453      —        —        —     

Share based compensation expense

  11,947      9,959      12,930      9,580      8,702      6,439      5,456   

Amortization of acquired intangible assets

  5,301      5,051      6,765      7,424      6,782      5,887      6,037   

Business development and integration expense

  6,175      482      523      1,618      4,715      755      —     

Compensation for post combination services

  1,393      1,685      2,215      2,721      438      —        —     

Restructuring charges

  —        —        —        1,065      603      —        —     

Loss on extinguishment of debt

  —        —        —        —        690      —        —     

Income tax adjustments

  (8,727   (6,034   (7,879   (8,671   (7,700   (4,668   (4,868
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP net income

$ 56,445    $ 43,992    $ 64,218    $ 56,014    $ 46,970    $ 44,881    $ 35,859   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GAAP diluted net income per share

$ 0.97    $ 0.77    $ 1.17    $ 0.96    $ 0.76    $ 0.87    $ 0.67   

Per share impact of non-GAAP adjustments identified above

  0.38      0.28      0.36      0.36      0.34      0.17      0.19   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP diluted net income per share

$ 1.35    $ 1.05    $ 1.53    $ 1.32    $ 1.10    $ 1.04    $ 0.86   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unaudited Combined Pro Forma Information of NetScout and the Communications Business

The following unaudited pro forma combined financial information was prepared using the historical consolidated financial statements of NetScout and the historical combined financial statements of the Communications Business. The unaudited pro forma combined financial information, including the notes thereto, should be read in conjunction with the following historical financial statements and accompanying notes for the applicable periods, which are incorporated by reference or included in this prospectus:

 

    NetScout’s audited consolidated financial statements for the fiscal year ended March 31, 2014 (fiscal year 2014) included in NetScout’s Annual Report on Form 10-K which was filed with the SEC on May 20, 2014 (incorporated by reference);

 

    NetScout’s unaudited consolidated financial statements for the nine-month period ended December 31, 2014 included in NetScout’s Quarterly Report on Form 10-Q which was filed with the SEC on January 27, 2015 (incorporated by reference); and

 

    The Communications Business’ audited combined financial statements for the year ended December 31, 2014 included in this prospectus.

The accompanying unaudited pro forma combined financial statements give pro forma effect to the acquisition of all of the outstanding common units of the Communications Business by NetScout assuming an equity consideration of $2,690.6 million, paid in NetScout Systems, Inc. common stock based on the closing price of NetScout common stock as of May 1, 2015 (the “Communications Business Acquisition”).

NetScout’s fiscal year 2014 ended on March 31, 2014. The Communications Business’ corresponding fiscal year ended on December 31, 2013. The unaudited interim pro forma combined balance sheet assumes that the

 

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Communications Business Acquisition took place on December 31, 2014 and combines NetScout’s historical consolidated balance sheet as of December 31, 2014 with the Communications Business’ historical combined balance sheet as of December 31, 2014 and applies pro forma adjustments to the resulting amounts.

The unaudited pro forma combined statements of operations for the fiscal year ended March 31, 2014, and the nine-month period ended December 31, 2014 assume that the Communications Business Acquisition took place on the first day of fiscal year 2014 (April 1, 2013). The unaudited pro forma combined statement of operations for the year ended March 31, 2014 combines NetScout’s historical consolidated statement of operations for the fiscal year 2014 with the Communications Business’ historical combined statement of operations for the fiscal year ended December 31, 2013 and applies pro forma adjustments to the resulting amounts. The unaudited pro forma combined statement of operations for the nine months ended December 31, 2014 combines NetScout’s historical consolidated statement of operations for the nine months ended December 31, 2014 with the Communications Business’ historical unaudited combined statement of operations for the nine-month fiscal period ended December 31, 2014 and applies pro forma adjustments to the resulting amounts.

The unaudited pro forma combined financial information has been prepared by NetScout’s management and is based on the estimates and assumptions set forth in the notes to such information. The unaudited pro forma combined financial information is being presented for illustrative purposes only and, therefore, is not necessarily indicative of the consolidated results of operations or financial position that might have been achieved by the combined company for the dates or periods indicated, nor is it necessarily indicative of the results of operations or financial position of the combined company that may occur in the future.

The unaudited pro forma combined financial information has been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States. The unaudited pro forma adjustments related to the Communications Business Acquisition are preliminary and do not reflect the final purchase price or final allocation of the excess of the purchase price over the net book value of the net assets of the Communications Business. The final purchase price and allocation of the purchase price will be based on the fair value of assets and liabilities that exist at the closing date of the Communications Business Acquisition. Accordingly, the pro forma purchase price adjustments are preliminary and are subject to further adjustments as additional information becomes available and additional analysis is performed. Upon closing of the acquisition, final valuations will be performed. The completion of the valuation, accounting for the Communications Business Acquisition and the allocation of the purchase price may be different than that of the amounts reflected in the pro forma purchase price allocation, and any differences could be material. Such differences could affect the purchase price and allocation of the purchase price, which may affect the value assigned to the tangible or intangible assets and amount of depreciation and amortization expense recorded in the combined statements of operations. There can be no assurance that NetScout will not alter the financing structure of the Communications Business Acquisition described herein.

The unaudited pro forma combined financial information contains only adjustments that are factually supportable, directly attributable to the Transactions and with respect to the pro forma combined statements of operations, expected to have a continuing impact on the combined business. The unaudited pro forma combined financial information does not reflect any cost savings or synergies that NetScout may realize after the completion of the Communications Business Acquisition.

 

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NETSCOUT SYSTEMS, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

(Dollar information in thousands)

 

  NetScout Systems,
Inc. As of
December 31, 2014
  Communications
Business As of
December 31, 2014
  Transaction
Adjustments
  Pro Forma
Adjustments
  Pro Forma As of
December 31, 2014
 

ASSETS

            

CURRENT ASSETS:

            

Cash and cash equivalents

   $ 106,704       $ —         $ 7,412 (B)    $ —        $ 114,116   

Marketable Securities

     87,967         —           —          —          87,967   

Accounts receivable, net

     83,415         188,058         16,284 (D)      —          287,757   

Inventories

     10,274         54,530         —          30,969 (F)      95,773   

Prepaid income taxes

     2,864         —           —          2,926 (L)      5,790   

Deferred income taxes

     14,174         —           25,814 (A)      (11,707 )(K)      28,281   

Prepaid expenses and other current assets

     9,846         33,492         (25,814 )(A)      22,188 (H)       39,712   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     315,244         276,080         23,696        44,376        659,396   

NONCURRENT ASSETS:

            

Fixed assets, net

     23,016         46,323         (15,569 )(C)      1,289 (G)      55,059   

Goodwill

     200,271         704,890         —          1,188,161 (H)      2,093,322   

Intangible assets, net

     52,469         204,291         —          893,209 (I)      1,149,969   

Deferred income taxes

     —           —           5,725 (A)      (4,200 )(K)      1,525   

Long-term marketable securities

     46,055         —           —          —          46,055   

Other assets

     1,873         7,245         1,438 (A)(E)      —          10,556   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 638,928       $ 1,238,829       $ 15,290      $ 2,122,835      $ 4,015,882   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

            

CURRENT LIABILITIES:

            

Accounts payable

   $ 10,927       $ 48,759       $ —        $ —        $ 59,686   

Accrued compensation

     39,369         —           28,275 (A)      —          67,644   

Accrued other

     11,026         91,591         (28,275 )(A)      11,000 (L)      85,342   

Deferred revenue

     107,595         194,104         —          (84,874 )(J)      216,825   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     168,917         334,454         —          (73,874     429,497   

NONCURRENT LIABILITIES:

            

Other long-term liabilities

     2,147         78,933         (65,938 )(A)      —          15,142   

Deferred tax liability - noncurrent

     2,679         —           58,526 (A)      332,234 (K)      393,439   

Accrued long-term retirement benefits

     1,586         —           7,412 (A)      —          8,998   

Long-term deferred revenue

     27,036         35,026         —          (12,370 )(J)      49,692   

Contingent liabilities, net of current portion

     4,445         —           —          —          4,445   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     206,810         448,413         —          245,990        901,213   

COMMITMENTS AND CONTINGENCIES

            

STOCKHOLDERS’ EQUITY:

            

Parent’s investment

     —           810,518         15,290 (B)(C)(D)(E)      (825,808 )(L)      —     

Common stock

     51         —           —          62 (L)(H)      113   

Additional paid-in capital

     292,059         —           —          2,690,563 (L)(H)      2,982,622   

Treasury stock

     (149,345      —           —          —          (149,345

Retained earnings

     290,905         —           —          (8,074 )(L)      282,831   

Accumulated other comprehensive income (loss)

     (1,552      (20,102      —          20,102 (L)      (1,552
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     432,118         790,416         15,290        1,876,845        3,114,669   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 638,928       $ 1,238,829       $ 15,290      $ 2,122,835      $ 4,015,882   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited pro forma combined financial information, including Note 2 for an explanation of the preliminary pro forma adjustments.

 

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NETSCOUT SYSTEMS, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

(Dollar and share information in thousands except per share data)

 

     NetScout
Systems, Inc.
Fiscal Year ended
March 31, 2014
    Communications
Business Fiscal
Year ended
December 31, 2013
     Pro Forma
Adjustments
    Pro Forma
Fiscal Year ended
March 31, 2014
 

Revenue:

         

Product

   $ 234,268      $ 623,632       $ (15,731 )(P)    $ 842,169   

Service

     162,379        211,259         (37,707 )(M)      335,931   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenue

     396,647        834,891