1017-00006 · Aurelius Global Media Group · Diligence/Tax

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

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I. Executive Summary

Calderwood & Harkness LLP represents Aurelius Global Media Group PLC ("Aurelius" or "AGMG"), a UK public limited company (Companies House No. 08431276), in connection with the proposed carve-out and divestiture of its legacy publishing division. The publishing division operates through Meridian Press Holdings LLC ("MPH"), a Delaware limited liability company (file no. 4521889), which is wholly owned by Aurelius Media Holdings Inc. ("AMH"), a Delaware corporation (file no. 5987324). AMH is, in turn, a wholly owned subsidiary of Aurelius.

The prospective buyer is Pinnacle Ridge Capital Partners Fund IV, L.P. ("PRCP IV"), a Delaware limited partnership (file no. 6234577), which is expected to acquire 100% of the membership interests in MPH through a newly formed acquisition vehicle. PRCP IV is a mid-market private equity fund advised by Pinnacle Ridge Capital Partners LLC. The anticipated enterprise value of the transaction is $480,000,000, representing an implied EV/EBITDA multiple of approximately 5.0x based on MPH's fiscal year 2023 Adjusted EBITDA of $96,000,000. This valuation is broadly consistent with comparable transactions in the legacy publishing and media distribution sector and reflects the declining organic revenue trajectory of the business offset by its stable cash-flow profile and real-asset base.

This memorandum has been prepared for internal use by the Calderwood & Harkness deal team and analyzes the following key tax structuring considerations:

(a) the US federal income tax treatment of MPH as a disregarded entity and the consequences of a membership interest sale;

(b) the potential benefits and mechanics of a Section 338(h)(10) election with respect to MPH's corporate subsidiaries;

(d) UK tax considerations, including the Substantial Shareholding Exemption and the controlled foreign company rules;

(e) state and local tax implications across MPH's nexus states; and

(f) transfer tax allocation and exposure arising from the deemed asset sale.

The purpose of this memorandum is to inform deal structuring decisions in advance of the negotiation and drafting of the definitive Membership Interest Purchase Agreement ("MIPA") and ancillary transaction documents. The analysis herein is preliminary and is based on information made available to us as of the date of this memorandum, including preliminary financial data provided by MPH's management team and the Aurelius corporate finance group, as well as discussions with Seller's financial advisor, Haverford Whitmore & Co. All tax estimates are subject to revision as additional facts become available and as the transaction structure is finalized.

II. Current Corporate and Tax Structure

A. Aurelius Group Structure — Relevant Entities

The following entities are relevant to the analysis of the proposed transaction:

Aurelius Global Media Group PLC ("Aurelius" or "AGMG"). Aurelius is the UK-headquartered, publicly listed ultimate parent entity of the Aurelius group of companies. It maintains a Premium Listing on the London Stock Exchange and sponsors a Level II American Depositary Receipt ("ADR") program traded on the Nasdaq Global Select Market. For fiscal year 2023, Aurelius reported consolidated revenue of approximately £3,800,000,000 across its global media, broadcasting, and publishing operations. The company is led by Chief Executive Officer Sir Edmund Hargreaves, KBE, Chief Financial Officer Priya Nandakumar, and General Counsel Claudia Restrepo. Aurelius is a UK tax resident company subject to UK corporation tax on its worldwide profits.

Aurelius Media Holdings Inc. ("AMH"). AMH is a Delaware corporation (file no. 5987324) and a wholly owned subsidiary of Aurelius. AMH serves as the principal US holding entity for Aurelius's North American media and publishing operations. AMH directly holds 100% of the equity of MPH as the sole member of MPH. AMH's registered agent is Crowne Albany Corporation, located at 1209 Orange Street, Wilmington, Delaware 19801. AMH files US federal income tax returns as a C corporation and is included in any applicable consolidated return filings to the extent required under Section 1501 of the Internal Revenue Code.

Meridian Press Holdings LLC ("MPH"). MPH is a Delaware limited liability company (file no. 4521889) with its principal office located at 1180 Avenue of the Americas, 22nd Floor, New York, New York 10036. Its registered agent is Fenmore Health IT Statutory Agent, located at 251 Little Falls Drive, Wilmington, Delaware 19808. AMH is the sole member of MPH. MPH serves as the operational holding company for Aurelius's legacy publishing division. Jonathan Kessler serves as President of MPH, and Angela Moretti serves as Senior Vice President of Finance. As discussed more fully in Section II.B below, MPH is classified as a disregarded entity for US federal income tax purposes.

MPH Subsidiaries Included in the Carve-Out. MPH holds equity interests in the following entities, each of which is included in the proposed carve-out transaction:

(i) Meridian Distribution Services Inc. ("MDS") — a Delaware corporation (file no. 4736201) that operates MPH's network of distribution centers and provides warehousing, fulfillment, and logistics services for the publishing business.

(ii) Bellweather Academic Press Inc. ("Bellweather") — a Delaware corporation (file no. 4801133) that operates the academic and scholarly publishing imprint, focusing on peer-reviewed journals, university-press partnerships, and textbook publishing.

(iii) Foxglove Media LLC ("Foxglove") — a New York limited liability company that operates the Foxglove Periodicals imprint, publishing a portfolio of consumer and trade magazines and associated digital properties.

(iv) Meridian Press Canada ULC ("Meridian Canada") — a British Columbia unlimited liability company that conducts the Canadian operations of the publishing division, including distribution, editorial, and marketing activities within Canada.

The organizational structure relevant to this transaction can be summarized as follows: Aurelius PLC (UK) → AMH (DE Corp) → MPH (DE LLC, disregarded entity) → MDS (DE Corp), Bellweather (DE Corp), Foxglove (NY LLC), and Meridian Canada (BC ULC).

B. Tax Classification of MPH

MPH is a single-member Delaware limited liability company whose sole member is AMH, a corporation. Under the entity classification regulations set forth in Treasury Regulation § 301.7701-3 (the so-called "check-the-box" regulations), a domestic eligible entity that has a single owner and does not affirmatively elect to be classified as a corporation is, by default, disregarded as an entity separate from its owner for US federal income tax purposes. MPH has not filed a Form 8832 (Entity Classification Election) electing to be treated as a corporation and accordingly is treated as a disregarded entity for US federal income tax purposes. As a consequence, all of MPH's assets, liabilities, income, deductions, and credits are treated as directly owned by, and attributable to, AMH for federal income tax purposes.

This classification has significant implications for how the sale of MPH's membership interests is treated for federal income tax purposes. Because MPH is disregarded, the sale of 100% of its membership interests is not treated as a sale of an interest in an entity; rather, it is treated as a sale of the underlying assets of MPH by AMH. This treatment is discussed in detail in Section III.A below.

With respect to MPH's subsidiaries, the following observations are relevant:

• MDS and Bellweather are each incorporated as Delaware corporations and are treated as separate C corporations for US federal income tax purposes. Their assets and liabilities are not treated as directly owned by AMH; rather, AMH (through MPH) holds stock in these entities, and the sale of MPH's membership interests will be treated as a sale of the stock of MDS and Bellweather (absent a Section 338(h)(10) election).

• Foxglove Media LLC is a New York limited liability company. Its entity classification for federal tax purposes depends on the number and nature of its owners. If Foxglove is wholly owned by MPH (a disregarded entity), Foxglove would itself be a disregarded entity under the check-the-box rules, and its assets would be treated as owned by AMH. If Foxglove has other members, it would be classified as a partnership. Based on our preliminary understanding, Foxglove is wholly owned by MPH and is therefore a disregarded entity. This assumption should be confirmed during the due diligence process.

• Meridian Press Canada ULC is a British Columbia unlimited liability company. Under Canadian tax principles, a ULC is generally treated as a flow-through entity — that is, it is transparent for Canadian federal and provincial income tax purposes to the extent of its single member's interest. However, for US federal income tax purposes, the classification of a Canadian ULC is determined under the check-the-box regulations. A ULC organized under British Columbia law is a "per se" entity eligible for check-the-box classification. If no election has been filed, the default classification would depend on whether the ULC is treated as having limited liability (in which case it would default to a corporation classification for a single-member entity). The treatment of the Canadian ULC requires further analysis, including a review of whether any Form 8832 has been filed and the implications under the Canada-US Tax Treaty. We recommend that this analysis be completed promptly.

C. Business Overview and Financial Profile

MPH operates the legacy publishing division of Aurelius through three principal imprints: Meridian Books (trade and consumer publishing), Bellweather Academic (scholarly and academic publishing), and Foxglove Periodicals (consumer and trade magazines). The business encompasses editorial, production, marketing, sales, and distribution functions across North America.

MPH operates a network of 14 distribution centers across North America. Four of these distribution centers are owned in fee simple by subsidiaries of MPH:

• Edison, New Jersey (approximately 280,000 sq. ft.)

• Columbus, Ohio (approximately 210,000 sq. ft.)

• Dallas, Texas (approximately 195,000 sq. ft.)

• Reno, Nevada (approximately 165,000 sq. ft.)

The remaining distribution centers are leased at various locations across the United States and Canada. The business employs approximately 2,400 full-time equivalent employees across its operations.

For fiscal year 2023, MPH reported revenue of $1,140,000,000 and Adjusted EBITDA of $96,000,000, representing an Adjusted EBITDA margin of approximately 8.4%. The legacy publishing segment represents approximately 25% of Aurelius's consolidated revenue. Revenue has declined modestly on an organic basis in recent fiscal years, consistent with industry trends affecting print publishing, though the business has partially offset declines through digital content licensing, subscription revenue, and cost optimization initiatives. The strong cash-flow generation of the division, together with its tangible asset base and established distribution infrastructure, supports the anticipated enterprise value of $480,000,000.

III. US Federal Income Tax Treatment of the Proposed Transaction

A. Sale of Membership Interests in a Disregarded Entity

As discussed in Section II.B above, MPH is a disregarded entity for US federal income tax purposes. The fundamental consequence of this classification is that a sale of 100% of the membership interests in MPH to Buyer is treated, for US federal income tax purposes, as a sale by AMH of all of the underlying assets of MPH, rather than as a sale of an equity interest in an entity. This treatment follows directly from the disregarded entity classification: because MPH does not exist as a separate entity for federal tax purposes, there are no "membership interests" to sell from a tax perspective. Instead, AMH is treated as selling each of the assets that are deemed to be directly owned by it through the disregarded entity.

This deemed asset sale treatment arises by operation of law — no affirmative election or filing by either party is required for this treatment to apply at the MPH level. The seller in the transaction for federal tax purposes is AMH (not MPH), and AMH recognizes gain or loss on the deemed sale of each asset of MPH. The character of such gain or loss — whether ordinary income or capital gain — is determined on an asset-by-asset basis according to the nature of each asset in the hands of AMH. For example, gain on inventory would be ordinary income, gain on depreciable personal property would be subject to depreciation recapture under Sections 1245 and 1250 of the Internal Revenue Code, and gain on capital assets held for more than one year would be long-term capital gain.

It is important to note, however, that the deemed asset sale treatment at the MPH level does not automatically extend to the corporate subsidiaries of MPH. Specifically, with respect to the stock of MDS and Bellweather — both of which are separate C corporations — the sale of the MPH membership interests is treated as a sale of the stock of those subsidiaries by AMH. This is because MDS and Bellweather are respected as separate entities for federal tax purposes; their assets are not treated as directly owned by AMH. Consequently, the gain recognized by AMH on the portion of the purchase price allocated to MDS and Bellweather stock would be treated as capital gain from the sale of stock, and there would be no step-up in the tax basis of the assets held by MDS and Bellweather — unless a Section 338(h)(10) election is made with respect to each of those subsidiaries. The potential for such an election is discussed immediately below.

Similarly, the treatment of the Foxglove Media LLC assets would follow the same principles as MPH if Foxglove is itself a disregarded entity (as we currently believe to be the case): its assets would be treated as part of the overall deemed asset sale. The treatment of the Meridian Canada ULC depends on its entity classification for US tax purposes, as discussed in Section II.B, and is addressed separately in Section VII.

B. Section 338(h)(10) Election — Overview and Benefits

Section 338(h)(10) of the Internal Revenue Code provides a mechanism by which the buyer and seller of a "qualified stock purchase" of a target may jointly elect to treat the stock acquisition as a deemed asset acquisition for federal income tax purposes. When this election is made, the target is treated as having sold all of its assets in a single transaction at fair market value and then liquidated, rather than being treated as having undergone a change in stock ownership. The economic effect is that the buyer obtains a stepped-up tax basis in the target's assets — equal to the purchase price allocated to those assets — while the seller recognizes gain as if the target had sold its assets and distributed the proceeds in liquidation.

In this transaction, the acquisition of the stock of MDS and Bellweather (which is treated as occurring through the purchase of the MPH membership interests, as discussed in Section III.A) would qualify as "qualified stock purchases" within the meaning of Section 338(d)(3) if the requirements of that provision are met. A "qualified stock purchase" requires the acquisition by a purchasing corporation of at least 80% of the total voting power of all classes of stock entitled to vote and at least 80% of the total value of all outstanding stock of the target, within a 12-month acquisition period. Because Buyer (through its acquisition vehicle) will acquire 100% of the MPH membership interests in a single transaction — and AMH holds 100% of the stock of both MDS and Bellweather through MPH — the 80% threshold is satisfied, and the acquisitions should constitute qualified stock purchases.

Benefits of a Section 338(h)(10) election in the context of this transaction include the following:

For Buyer (Pinnacle Ridge):

The primary benefit of the Section 338(h)(10) election to Buyer is a step-up in the tax basis of MDS's and Bellweather's assets to fair market value. This step-up results in increased depreciation and amortization deductions for Buyer in post-closing taxable periods, which reduces Buyer's future taxable income and enhances after-tax cash flow. The benefit is particularly valuable with respect to intangible assets — including goodwill, customer relationships, author contracts and publishing rights, trade names (such as "Meridian Press," "Bellweather Academic," and "Foxglove"), and ISBN prefix assignments — which can be amortized over a 15-year period under Section 197 of the Internal Revenue Code. Given the significant goodwill and intangible value embedded in the MPH business, the present value of the amortization benefit to Buyer is expected to be substantial.

Additionally, for tangible depreciable assets — including distribution center equipment, warehouse fixtures, printing presses, and IT infrastructure — the step-up to fair market value provides an increased depreciation base, potentially eligible for bonus depreciation or accelerated cost recovery under the Modified Accelerated Cost Recovery System (MACRS). The combined amortization and depreciation benefit provides Buyer with a meaningful tax shield that enhances the internal rate of return on the investment.

For Seller (AMH):

The Section 338(h)(10) election results in the targets (MDS and Bellweather) being treated as having sold their assets and liquidated. AMH, as the deemed selling shareholder, recognizes gain on the deemed asset sale at the subsidiary level, with the character of gain determined asset-by-asset. In certain scenarios, this deemed asset sale treatment can be more favorable to Seller than stock sale treatment — for example, if the targets hold assets with a tax basis in excess of AMH's basis in the target stock (though this is not typically the case). However, for a C corporation seller such as AMH, the rate differential between ordinary income and capital gain is minimal, as both are taxed at the 21% federal corporate rate. Accordingly, the primary economic benefit of the Section 338(h)(10) election flows to Buyer, and Seller typically negotiates consideration — either in the form of a higher purchase price or a tax indemnity mechanism — in exchange for agreeing to the election.

Importantly, the Section 338(h)(10) election eliminates the double taxation that would otherwise result from the combination of (i) a stock-level gain recognized by AMH and (ii) potential built-in gain at the corporate subsidiary level that would be realized in a subsequent asset disposition by Buyer. By treating the transaction as a deemed asset sale followed by a deemed liquidation, the election ensures that only a single level of corporate-level tax is imposed on the transaction, with the gain recognized at the AMH level and no additional tax imposed on the deemed liquidation of MDS or Bellweather.

Based on preliminary discussions reflected in the indicative term sheet, Buyer (Pinnacle Ridge) is expected to request a Section 338(h)(10) election with respect to both MDS and Bellweather. We recommend that Seller agree to the election, subject to the following conditions:

(i) the purchase price allocation among asset classes shall be mutually agreed between Buyer and Seller and documented in a separate Section 338(h)(10) Election Agreement to be executed at signing of the MIPA;

(ii) Buyer shall bear the incremental tax cost, if any, to Seller resulting from the election (i.e., any increase in Seller's tax liability attributable to the election as compared to stock sale treatment); and

(iii) the parties shall file consistent allocations on their respective tax returns and cooperate in the preparation and filing of all required forms and elections.

C. Mechanics of the Section 338(h)(10) Election

The mechanics of the Section 338(h)(10) election require the parties to comply with the following filing and documentation requirements:

IRS Form 8023. The parties must jointly file IRS Form 8023 (Elections Under Section 338 for Corporations Making Qualified Stock Purchases) to make the Section 338(h)(10) election with respect to each target (MDS and Bellweather). Form 8023 must be filed no later than the 15th day of the 9th month beginning after the month in which the "acquisition date" occurs — that is, the date on which the qualified stock purchase is completed. For a closing expected in the third or fourth quarter of 2024, the filing deadline would fall in the second or third quarter of 2025. The election is irrevocable once filed. Both the purchasing corporation (Buyer's acquisition vehicle) and the selling consolidated group member (AMH) must sign Form 8023.

IRS Form 8883. Each party must file IRS Form 8883 (Asset Allocation Statement Under Section 338) to report the allocation of the aggregate deemed sales price ("ADSP") and the adjusted grossed-up basis ("AGUB") among the target's assets. The allocation must follow the residual method prescribed by Treasury Regulation § 1.338-6, which requires the purchase price to be allocated among asset classes in the following order of priority:

• Class I: Cash and general deposit accounts (including checking and savings accounts, but not certificates of deposit).

• Class II: Actively traded personal property within the meaning of Section 1092(d)(1) and certificates of deposit and foreign currencies.

• Class III: Accounts receivable, mortgages, and credit card receivables that arise in the ordinary course of business.

• Class IV: Inventory.

• Class V: All assets not included in any other class — this is a broad residual category that includes fixed assets, equipment, distribution center infrastructure, printing presses, warehouse fixtures, vehicles, IT hardware, and other tangible personal property.

• Class VI: Section 197 intangibles other than goodwill and going concern value — including trademarks (such as "Meridian Press," "Bellweather Academic," and "Foxglove"), trade names, author contracts, customer lists and relationships, non-compete agreements, ISBN prefix assignments, publishing rights, and similar intangible assets.

• Class VII: Goodwill and going concern value — the residual amount after allocation to all other classes.

The allocation must be agreed between Buyer and Seller and reflected consistently on their respective federal and state income tax returns. Any disagreement between the parties as to the allocation should be resolved through the dispute resolution mechanism set forth in the Section 338(h)(10) Election Agreement. We recommend that the allocation be supported by a third-party valuation report prepared by a qualified appraiser, which will provide an independent basis for the allocation and reduce the risk of challenge by the Internal Revenue Service.

The Section 338(h)(10) Election Agreement to be executed at signing of the MIPA should address, at a minimum, the following matters: (i) the parties' agreement to make the election; (ii) the methodology and timetable for agreeing on the purchase price allocation; (iii) the parties' obligations with respect to the preparation and filing of Forms 8023 and 8883; (iv) representations regarding the qualification of the transaction as a qualified stock purchase; (v) cooperation and information-sharing obligations; and (vi) indemnification for any incremental tax cost to Seller. We will prepare a draft of this agreement for review by the deal team.

IV. Estimated US Tax Liability to Seller

A. Estimated Taxable Gain

The estimated taxable gain to Seller arising from the proposed transaction is calculated as follows:

The estimated aggregate adjusted tax basis of $252,000,000 is based on a preliminary analysis of historical cost, accumulated depreciation, and amortization schedules for MPH's assets, as well as AMH's adjusted tax basis in the stock of MDS and Bellweather (or, in the case of a Section 338(h)(10) election, the aggregate adjusted tax basis of MDS's and Bellweather's assets). This estimate is preliminary and requires confirmation through a detailed review of the relevant tax records and schedules. We recommend that the engagement team coordinate with Seller's independent auditor, Pemberton Graves LLP (Robert Ainsley, engagement partner), to obtain the following:

(i) a schedule of the adjusted tax basis of each material asset of MPH as of the anticipated closing date;

(ii) depreciation and amortization schedules for all depreciable and amortizable assets;

(iii) a schedule of AMH's adjusted tax basis in the stock of MDS and Bellweather;

(iv) historical cost and accumulated depreciation schedules for MDS's and Bellweather's assets; and

(v) any relevant elections, basis adjustments, or other items that may affect the tax basis calculations.

It is important to note that the exact amount of taxable gain will depend on several factors that will not be determined until closing, including:

• the final purchase price after closing adjustments, including the net working capital true-up;

• closing indebtedness of approximately $62,500,000, consisting of a $50,000,000 intercompany promissory note payable by MPH to AMH and approximately $12,500,000 in capital lease obligations;

• closing cash of approximately $8,200,000;

• transaction expenses of approximately $4,700,000 (consisting of financial advisory fees, legal fees, accounting fees, and other transaction-related costs); and

• the final purchase price allocation among asset classes, which will determine the character of the gain recognized (ordinary income versus capital gain) on an asset-by-asset basis.

B. Estimated Tax Rate and Liability

The estimated tax liability to Seller is calculated by applying the applicable federal and state tax rates to the estimated taxable gain:

• Federal corporate income tax rate: 21% (as enacted by the Tax Cuts and Jobs Act of 2017 and codified in Section 11(b) of the Internal Revenue Code).

• Applicable state and local income tax rates: The effective state tax rate depends on the apportionment of the gain across the states in which AMH and MPH have nexus. Based on our preliminary analysis of MPH's operations and the location of its assets, employees, and revenue-generating activities, we estimate a blended effective state income tax rate of approximately 3% to 5% after accounting for the federal deductibility of state income taxes (which is no longer available for C corporations under current law — note: the TCJA eliminated the federal deduction for state and local taxes only for individuals; C corporations continue to deduct state income taxes). Taking the federal benefit of the state income tax deduction into account, the net incremental state tax rate is somewhat lower.

• Blended federal/state effective tax rate: Approximately 21% (inclusive of state income taxes net of the federal deduction). This blended rate reflects the interaction between the 21% federal rate and the incremental state tax burden after federal benefit. The blended rate will be refined once detailed state-by-state apportionment modeling is completed.

Estimated US tax liability to Seller:

$228,000,000 × 21% ≈ $48,000,000

This estimated tax liability of approximately $48,000,000 is subject to refinement based on: (i) the final purchase price allocation, which will determine the mix of ordinary income and capital gain (though, as noted, for a C corporation such as AMH, both categories are taxed at the same 21% federal rate); (ii) the actual state apportionment factors applicable to the gain; (iii) any available tax attributes at the AMH level, including net operating loss carryforwards, credit carryforwards, or other deductions that could offset the gain; and (iv) the final closing adjustments to the purchase price.

We note that the rate differential between ordinary income and capital gain is not significant for AMH as a C corporation at the federal level. However, at the state level, certain states may impose different rates or different apportionment methods for capital gains versus ordinary business income, which could affect the overall state tax burden. This issue will be addressed in the detailed state-by-state modeling.

C. Intercompany Note Treatment

MPH is party to a $50,000,000 intercompany promissory note payable to AMH (the "Intercompany Note"). The Intercompany Note is expected to be repaid at or immediately prior to closing as part of the pre-closing restructuring steps.

Because MPH is a disregarded entity for US federal income tax purposes, the Intercompany Note is disregarded for federal tax purposes. The note is treated as an obligation between a branch and its owner — that is, between AMH and itself — and therefore has no independent existence for federal income tax purposes. Accordingly, the "repayment" of the Intercompany Note at closing is a non-event for federal income tax purposes: no gain or loss is recognized by either AMH or MPH on the repayment, and the repayment does not affect the computation of taxable gain on the deemed asset sale.

For state tax purposes, the treatment of the Intercompany Note may vary. Certain states may not follow the federal disregarded entity classification or may respect the note as a separate obligation for purposes of their own corporate income tax or franchise tax. In particular, states that impose entity-level taxes on LLCs (such as California, if nexus were present) may treat the note as a genuine intercompany obligation. This issue should be evaluated on a state-by-state basis as part of the detailed state tax analysis.

V. UK Tax Considerations

A. Substantial Shareholding Exemption (SSE) Analysis

Aurelius Global Media Group PLC is a UK tax resident company. While the disposal of the publishing division occurs at the AMH level — a US subsidiary of Aurelius — it is necessary to analyze the upstream UK tax consequences of the transaction, including the potential application of the UK controlled foreign company ("CFC") rules and the availability of the Substantial Shareholding Exemption ("SSE").

Transaction Structure and UK Tax Exposure. In the proposed transaction, it is AMH (a Delaware corporation) that is selling the membership interests in MPH. The sale proceeds will be received by AMH, and the taxable gain will be recognized at the AMH level for US federal income tax purposes. Aurelius PLC is not directly disposing of any shares or assets in the transaction; rather, the value of Aurelius's investment in AMH will be reduced by the removal of the MPH publishing division from AMH's asset base.

For UK tax purposes, no direct UK corporate tax liability arises on the disposal because:

(a) the disposal is made by AMH, a non-UK entity that is not subject to UK corporation tax on its income or gains (absent a UK permanent establishment);

(b) the assets being sold — the MPH membership interests, and, on a deemed basis, the underlying assets of MPH — are located in the United States and do not constitute UK-situs property; and

(c) there is no disposal of shares in a UK entity, and therefore the UK capital gains tax regime does not apply to the transaction directly.

SSE Analysis. The Substantial Shareholding Exemption, enacted under Schedule 7AC of the Taxation of Chargeable Gains Act 1992, provides an exemption from UK corporation tax on gains arising on the disposal of shares by a company that satisfies the following principal conditions:

(i) the disposing company holds (or has held within the preceding two years) at least 10% of the ordinary share capital of the company being disposed of;

(ii) the shares have been held for a continuous period of at least 12 months within the six years preceding the disposal;

(iii) the company whose shares are being disposed of is a trading company or the holding company of a trading group; and

(iv) the disposing company is a trading company or a member of a trading group (this condition has been relaxed for "institutional investors" and companies meeting certain qualifying conditions under amendments effective from April 2017).

In this transaction, Aurelius PLC is not directly disposing of shares in AMH or in any other entity. Accordingly, the SSE does not apply directly to the transaction as structured. However, the SSE analysis is relevant for the following reasons: (i) it supports the conclusion that even if the transaction were restructured to involve a share disposal at a higher level in the corporate chain — for example, a sale of AMH stock by Aurelius PLC — the SSE would likely be available to exempt the resulting gain, given Aurelius's long-standing holding of 100% of AMH and AMH's status as a holding company of a trading group; and (ii) it provides comfort that no UK tax exposure would arise in alternative transaction structures that may be considered.

CFC Considerations. The UK CFC rules, set forth in Part 9A of the Taxation (International and Other Provisions) Act 2010 ("TIOPA 2010"), impose a charge to UK corporation tax on a UK-resident company that controls a controlled foreign company, to the extent that the CFC has "chargeable profits" arising from activities that have been artificially diverted from the UK. AMH is a CFC of Aurelius PLC because Aurelius PLC holds more than 50% of the shares (and indeed 100% of the shares) of AMH.

The gain recognized by AMH on the deemed asset sale could, in principle, constitute "chargeable profits" of AMH for CFC purposes. However, the CFC rules provide a number of exemptions that may apply to exclude the gain from the CFC charge:

• Entity-level exemption: If AMH's total accounting profits (or, more precisely, its "assumed total profits") do not exceed the threshold amount or if AMH satisfies other entity-level exemptions.

• Excluded territories exemption: The United States is generally an "excluded territory" for CFC purposes, provided that AMH satisfies the conditions of the excluded territories regulations (including that AMH's income is subject to tax in the US at a rate of at least 75% of the UK corporation tax rate — given the 21% US rate and the 25% UK rate, this condition is satisfied: 21% / 25% = 84%, which exceeds 75%).

• Low-profit exemption: If AMH's accounting profits do not exceed £500,000 (or £50,000 for the de minimis exemption), though this is unlikely to apply given the magnitude of the gain.

Based on our preliminary analysis, the gain recognized by AMH on the sale of the MPH membership interests should not give rise to a CFC charge in the UK, provided that AMH satisfies the excluded territories exemption for the United States. However, this conclusion requires confirmation from Aurelius's UK tax advisors, who are better positioned to evaluate AMH's overall CFC profile and any interactions with other provisions of the UK CFC rules.

Conclusion on UK Tax. No direct UK corporate tax liability is expected to arise on the proposed disposal. The SSE analysis supports the conclusion that even in an alternative structure involving a share disposal at a higher level, the exemption would likely be available. We recommend coordinating with Aurelius's UK tax counsel — understood to be Whitford Chambers LLP — to confirm the CFC analysis and to ensure that no other UK tax provisions (including the diverted profits tax or the anti-avoidance rules) are triggered by the transaction.

B. Withholding Tax Considerations

The proposed transaction does not give rise to any US or UK withholding tax obligations, based on the following analysis:

US Withholding Tax. The sale of membership interests in a US LLC by a US corporation (AMH) does not trigger any US withholding tax obligation. US withholding taxes on dispositions of US interests are generally imposed under FIRPTA (the Foreign Investment in Real Property Tax Act, Section 1445 of the Internal Revenue Code) on sales by foreign persons of US real property interests. Because AMH is a domestic corporation (i.e., a corporation organized in the United States), FIRPTA withholding does not apply to the sale. Nevertheless, as a customary closing deliverable, AMH will provide a non-foreign affidavit (also known as a "FIRPTA certificate") to Buyer at closing, certifying AMH's US tax identification number and confirming that AMH is not a "foreign person" within the meaning of Section 1445. This certificate will eliminate any withholding obligation on the part of Buyer and is a standard requirement in transactions involving the sale of membership interests in entities that may hold US real property interests.

UK Withholding Tax. No UK withholding taxes arise on the transaction as structured. The sale proceeds flow from Buyer to AMH, a US entity, and do not constitute UK-source income subject to UK withholding. There are no dividends, interest payments, or royalties being paid to or from a UK entity in connection with the closing of the transaction that would trigger UK withholding obligations.

VI. State and Local Tax Implications

A. Nexus States and Apportionment

AMH and MPH have nexus for state and local income tax purposes in multiple jurisdictions by virtue of MPH's physical presence, employees, property, and revenue-generating activities. The following is a summary of the principal nexus states and the key considerations applicable to each:

New Jersey. MPH operates a distribution center at 45 Fieldcrest Avenue, Edison, New Jersey 08837. This facility, together with MPH's employees and tangible personal property located in New Jersey, establishes nexus for New Jersey corporate business tax ("CBT") purposes. AMH's apportioned gain from the deemed asset sale will be subject to the New Jersey CBT. New Jersey imposes a corporate income tax at a rate of 9% on allocated entire net income (with a surtax of 2.5% for taxpayers with allocated entire net income exceeding $1,000,000, resulting in an effective rate of 11.5% for larger taxpayers). New Jersey generally conforms to the federal Section 338(h)(10) election. The apportionment of gain to New Jersey will be determined based on New Jersey's single sales factor apportionment formula, with sourcing rules applicable to the sale of intangible property and business assets.

Ohio. MPH operates a distribution center at 2200 Westbelt Drive, Columbus, Ohio 43228. Ohio has replaced its traditional corporate franchise/income tax with the Commercial Activity Tax ("CAT"), which is a gross receipts tax imposed at a rate of 0.26% on taxable gross receipts exceeding $1,000,000. The critical question for Ohio purposes is whether the sale proceeds from the deemed asset sale constitute "gross receipts" for CAT purposes. Under Ohio Rev. Code § 5751.01, "gross receipts" generally includes receipts from the sale of tangible personal property, services, and other business activities, but certain exclusions may apply (including exclusions for casual or isolated sales). The application of the CAT to gain from the sale of a business division requires careful analysis. Ohio repealed its corporate franchise/income tax effective for tax year 2014, so no Ohio income tax would apply to the gain, but the CAT implications must be evaluated.

Texas. MPH operates a distribution center at 8700 Freeport Parkway, Dallas, Texas 75063. Texas imposes a franchise (margin) tax on entities doing business in Texas. The margin tax is computed based on "total revenue" minus the greater of cost of goods sold, compensation, or a 30% standard deduction. Gain on the sale of business assets may be included in "total revenue" for margin tax purposes, though the treatment depends on the specific category of assets sold and the Texas Comptroller's interpretation of the margin tax rules. The franchise tax rate is 0.375% for entities primarily engaged in retail or wholesale trade and 0.75% for other entities. Texas does not impose a separate corporate income tax.

Nevada. MPH operates a distribution center at 1400 Scheels Drive, Reno, Nevada 89502. Nevada does not impose a corporate income tax. However, Nevada does impose a Commerce Tax on business entities with Nevada gross revenue exceeding $4,000,000. The Commerce Tax rate varies by industry but is generally in the range of 0.051% to 0.331%. The question is whether the sale proceeds from the deemed asset sale would be included in "Nevada gross revenue" for Commerce Tax purposes. If so, the Commerce Tax exposure would be relatively modest given the low rate.

New York. MPH maintains its principal office at 1180 Avenue of the Americas, 22nd Floor, New York, New York 10036, and Foxglove Media LLC is organized under New York law. These connections establish nexus for the New York State corporate franchise tax under Article 9-A of the New York Tax Law. AMH's apportioned gain from the deemed asset sale will be subject to New York State corporate franchise tax at a rate of 7.25% on business income (with potential additional rates for larger taxpayers). Additionally, if AMH is deemed to be "doing business" in New York City, the gain could be subject to the New York City General Corporation Tax at a rate of 8.85%. New York generally conforms to the federal Section 338(h)(10) election. Apportionment is based on a single sales factor formula.

Delaware. MPH, MDS, and Bellweather are all incorporated or organized in Delaware. Delaware does not impose a corporate income tax on entities that earn income outside the state, and the sale of MPH membership interests by AMH — a Delaware holding company — should not give rise to Delaware corporate income tax liability, provided that the income is not derived from Delaware sources. However, the Delaware annual franchise tax applies to Delaware-incorporated entities, computed based on either the authorized shares method or the assumed par value capital method. The franchise tax is a flat annual fee and is not based on income.

British Columbia / Canada. Meridian Press Canada ULC operates in British Columbia, Canada. The Canadian federal and provincial tax implications of the carve-out of the Canadian subsidiary are discussed separately in Section VII below.

Other States. MPH operates leased warehouse and office locations at approximately eight additional sites across the United States. A nexus analysis is required for each state in which these facilities are located to determine whether AMH has filing obligations and potential income tax liability in those states. The specific locations of these facilities have been requested from MPH's management and are expected to be provided in connection with the tax due diligence process.

B. Section 338(h)(10) State Conformity

Not all states conform to the federal Section 338(h)(10) election, and the treatment of the election varies by jurisdiction. The following is a summary of conformity in the principal nexus states:

• New York: Generally conforms to the federal Section 338(h)(10) election. New York respects the election and treats the transaction as a deemed asset sale for state corporate franchise tax purposes.

• New Jersey: Generally conforms to the federal Section 338(h)(10) election. New Jersey follows the federal treatment and allows the election to apply for CBT purposes.

• Ohio: The conformity question is of limited relevance for Ohio given the replacement of the corporate income tax with the CAT, which is a gross receipts tax. The CAT analysis focuses on whether the sale proceeds constitute gross receipts, regardless of whether the transaction is treated as an asset sale or stock sale.

• Texas: The Texas franchise (margin) tax has unique rules for asset versus equity transactions. Texas may not fully conform to the federal Section 338(h)(10) election, and the treatment of the election for margin tax purposes requires further analysis. Specifically, the margin tax computation is based on "total revenue" as reported on the entity's federal return, and the classification of the transaction (asset sale versus stock sale) may affect the computation of total revenue differently under Texas rules than under federal rules.

• Nevada: Conformity is not relevant for Nevada income tax purposes because Nevada does not impose an income tax. The Commerce Tax analysis focuses on gross revenue, and the treatment of the election does not directly affect the Commerce Tax computation.

A detailed state-by-state analysis is required to determine the incremental state tax impact of making the Section 338(h)(10) election for MDS and Bellweather as compared to stock sale treatment. This analysis should take into account the apportionment factors (sales, payroll, and property) at the MPH, MDS, and Bellweather level, which will determine the allocation of gain across the nexus states.

C. Estimated State Tax Impact

Based on our preliminary analysis, the blended effective state income tax rate applicable to the gain from the transaction, after accounting for the federal deduction for state income taxes, is estimated at approximately 3% to 5% of apportioned gain. This blended rate is included in the overall blended federal/state effective tax rate of approximately 21% used in the estimated total US tax liability calculation of $48,000,000 set forth in Section IV.B above.

The actual state tax liability will depend on the specific apportionment formulas, filing methodologies (separate return versus combined/unitary filing), and applicable rates in each nexus state. Detailed state-by-state modeling will be performed once the purchase price allocation is finalized and complete apportionment data (revenue, payroll, and property) is obtained from MPH's management and Seller's auditor.

VII. Canadian Tax Considerations

A. Meridian Press Canada ULC

Meridian Press Canada ULC ("Meridian Canada") is a British Columbia unlimited liability company that conducts the Canadian operations of the publishing division. As noted in Section II.B, a ULC organized under British Columbia law is a flow-through entity for Canadian federal and provincial income tax purposes, meaning that its income and gains are generally attributed to its members rather than being taxed at the entity level. This hybrid structure — transparent for Canadian tax purposes but potentially opaque for US tax purposes under the check-the-box regulations — creates a number of cross-border tax issues that must be carefully analyzed.

Canadian Tax Consequences of the Transaction. The transfer of the MPH membership interests to Buyer may trigger deemed disposition rules at the Canadian subsidiary level. Under Canadian tax law, a change in the ultimate beneficial ownership of Meridian Canada could give rise to a deemed year-end for the ULC, potentially triggering the recognition of accrued gains on Canadian-situs assets. Additionally, if the transaction is treated as an acquisition of control of Meridian Canada (within the meaning of the Income Tax Act (Canada)), certain restrictions may apply to the use of pre-acquisition tax attributes, including non-capital loss carryforwards and investment tax credits.

Canadian Federal and Provincial Tax. To the extent that any gain is recognized at the Canadian level, Meridian Canada's income would be subject to Canadian federal corporate income tax (currently at a rate of 15% for general corporations) and British Columbia provincial corporate income tax (currently at a rate of 12% on income exceeding the small business threshold). The combined federal/provincial rate for general corporate income in British Columbia is approximately 27%.

Canada-US Tax Treaty. The Canada-United States Tax Convention (1980), as amended by subsequent protocols, provides rules for the elimination of double taxation on income earned by residents of one country in the other country. To the extent that any portion of the gain from the deemed asset sale is allocable to Canadian assets or Canadian operations, the Treaty's provisions regarding the taxation of business profits (Article VII) and capital gains (Article XIII) must be analyzed to ensure that the gain is not subject to double taxation in both the US and Canada. Article XIII generally grants the source country (Canada) the right to tax gains from the alienation of real property situated in Canada and gains from the alienation of property forming part of the business property of a permanent establishment in Canada, while other capital gains are generally taxable only in the country of residence of the alienator.

Recommendations. Given the complexity of the cross-border tax issues associated with Meridian Canada, we recommend that Aurelius engage Canadian tax counsel to advise on:

(i) the Canadian federal and provincial tax consequences of the sale of the MPH membership interests, including any deemed disposition or acquisition of control implications at the Meridian Canada level;

(ii) any Canadian withholding obligations that may arise on payments made in connection with the transaction (including potential withholding under Section 116 of the Income Tax Act (Canada) on the disposition of "taxable Canadian property");

(iii) the interaction between the US and Canadian tax treatment of the transaction under the Canada-US Tax Treaty, and any steps that should be taken to minimize the risk of double taxation; and

(iv) Canadian Competition Act clearance implications for the acquisition of the Canadian subsidiary (noting that Competition Act pre-merger notification and clearance is expected to be a closing condition under the MIPA).

We will coordinate with Canadian counsel as soon as they are retained and will incorporate their analysis into the overall tax structuring framework for the transaction.

VIII. Transfer Taxes

A. Overview

The sale of membership interests in a Delaware limited liability company is generally not subject to state transfer taxes in most jurisdictions. Transfer taxes — including real property transfer taxes, deed recording taxes, and stamp duties — are typically imposed on the transfer of real property or, in some states, on the transfer of a controlling interest in an entity that owns real property. Because the proposed transaction is structured as a sale of membership interests (rather than a direct sale of real property), the threshold question is whether the transfer of the MPH membership interests triggers transfer tax obligations in the jurisdictions where MPH and its subsidiaries own real property.

However, the analysis is complicated by the fact that the transaction is treated as a deemed asset sale for federal income tax purposes (and potentially for state tax purposes) by virtue of MPH's disregarded entity status and the potential Section 338(h)(10) elections for MDS and Bellweather. Certain states may treat the deemed asset sale as a transfer of real property for transfer tax purposes, even though no actual conveyance of real property occurs. Additionally, several states impose "controlling interest" transfer taxes on transfers of a controlling interest (typically 50% or more) in an entity that owns real property, regardless of whether the transaction is structured as an asset sale or equity sale.

Real Property Transfer Tax Analysis. The owned distribution centers (Edison, NJ; Columbus, OH; Dallas, TX; and Reno, NV) may trigger real property transfer tax concerns in the following jurisdictions:

• New Jersey: New Jersey imposes a realty transfer fee under N.J.S.A. § 46:15-7 on the recording of deeds and other instruments evidencing the transfer of real property. In addition, New Jersey imposes a controlling interest transfer tax under N.J.S.A. § 46:15-7.2 on the transfer of a controlling interest (defined as more than 50% of the total fair market value of all classes of stock or ownership interests) in an entity that owns, directly or indirectly, a controlling interest in real property (defined as a classified real property interest with a fair market value of more than $1,000,000 or an unclassified interest). The transfer of 100% of the MPH membership interests to Buyer may constitute a transfer of a controlling interest in an entity that owns real property in New Jersey (the Edison distribution center). The controlling interest transfer tax rate is 1% of the equalized assessed value of the real property. Analysis is required to determine the applicability and amount of the tax.

• Ohio: Ohio imposes a real property conveyance fee under Ohio Rev. Code § 322.02 on the transfer of real property. The fee is imposed at the county level and is typically calculated based on the sale price of the real property. The transfer of a controlling interest in an entity that owns Ohio real property may also trigger the conveyance fee under Ohio Rev. Code § 319.203 (the "controlling interest" provision). Analysis is required to determine the applicability of the fee to the transfer of the MPH membership interests and the Columbus distribution center.

• Texas: Texas does not impose a general real property transfer tax or stamp tax on the sale of real property at the state level. County-level recording fees are minimal and are assessed on the recordation of deeds and other instruments. The transfer of membership interests in an LLC that owns Texas real property is generally not subject to transfer tax in Texas.

• Nevada: Nevada imposes a real property transfer tax under NRS § 375.020 on the transfer of real property within the state. The tax is imposed at a rate of $1.95 per $500 of value (or fraction thereof) on the first $100,000 of value, with additional rates applicable to larger transfers. The transfer of a controlling interest in an entity that owns Nevada real property may also trigger the transfer tax. Analysis is required to determine the applicability of the tax to the transfer of the MPH membership interests and the Reno distribution center.

Allocation of Transfer Taxes. Per the anticipated terms of the definitive MIPA, transfer taxes arising from the transaction are to be borne 50/50 by Buyer and Seller. This allocation should be reflected in the MIPA and in the closing settlement statement.

Recommendation. We recommend engaging local counsel or a title agent in each applicable jurisdiction to confirm the transfer tax exposure and to prepare any required filings or exemption certificates. We understand that Foxworth Daniels & Co. of Wilmington, Delaware has been retained as the lien search agent for the transaction; Foxworth Daniels may also be able to assist with the transfer tax analysis in certain jurisdictions or to recommend local counsel for this purpose.

IX. Tax Structuring Recommendations

A. Summary of Recommendations

Based on the foregoing analysis, we make the following preliminary recommendations for the tax structuring of the proposed transaction:

1. Proceed with membership interest sale structure. The sale of 100% of the MPH membership interests is the preferred transaction structure from a tax perspective. This structure provides a deemed asset sale at the MPH level by virtue of MPH's disregarded entity classification, resulting in a step-up in the tax basis of MPH's assets for Buyer, while preserving a clean legal transfer at the entity level. The membership interest sale also minimizes the need for third-party consents and avoids the complexity and cost associated with a direct asset purchase agreement, including the need to assign individual contracts, permits, and licenses.

2. Agree to Section 338(h)(10) election for MDS and Bellweather. We recommend that Seller agree to Buyer's expected request for a Section 338(h)(10) election with respect to MDS and Bellweather, subject to the following conditions: (a) the purchase price allocation among asset classes shall be mutually agreed between Buyer and Seller and documented in a separate Section 338(h)(10) Election Agreement; (b) Buyer shall bear any incremental tax cost to Seller resulting from the election as compared to stock sale treatment; and (c) both parties shall execute the required IRS forms and file consistent allocations on their respective tax returns. The election provides significant economic value to Buyer through the step-up in asset basis and should be a negotiating chip for Seller in the purchase price or indemnity discussions.

3. UK SSE / CFC analysis. We recommend coordinating with Aurelius's UK tax advisors to confirm that no UK corporation tax liability arises from the transaction. Based on our preliminary analysis, no direct UK corporate tax is expected: the disposal is made by AMH (a non-UK entity), the assets are located outside the UK, and the SSE would be available if the transaction were restructured as a share disposal. The CFC analysis should confirm that the excluded territories exemption for the United States is available to shield the gain from a CFC charge.

4. State tax planning. We recommend performing a detailed state-by-state modeling exercise to quantify the state income tax exposure and identify opportunities to minimize the state tax burden through apportionment optimization. This analysis should confirm conformity with the Section 338(h)(10) election in each nexus state and evaluate the potential for combined/unitary filing to reduce the overall state effective tax rate. The analysis should also address the Ohio CAT, Texas margin tax, and Nevada Commerce Tax implications in detail.

5. Canadian subsidiary. We recommend engaging Canadian tax counsel promptly to conduct a detailed analysis of the Canadian federal and provincial tax consequences of the transaction as it relates to Meridian Press Canada ULC. The Canadian analysis should address deemed disposition issues, withholding obligations, and Canada-US Tax Treaty implications, as well as Competition Act clearance requirements for the Canadian subsidiary.

6. Transfer taxes. We recommend conducting a jurisdiction-by-jurisdiction analysis of real property transfer tax and controlling interest transfer tax exposure in New Jersey, Ohio, Texas, and Nevada. The transfer tax analysis should identify any available exemptions or exclusions and quantify the estimated transfer tax liability in each jurisdiction. The anticipated 50/50 sharing arrangement between Buyer and Seller should be reflected in the MIPA.

7. FIRPTA certificate. We will prepare a non-foreign affidavit (FIRPTA certificate) for AMH to deliver to Buyer at closing, certifying that AMH is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code. This is a customary closing deliverable that will eliminate any FIRPTA withholding obligation on the part of Buyer.

8. Tax indemnification provisions. In the MIPA, we recommend including comprehensive tax representations, warranties, and indemnification provisions. These provisions should address, at a minimum: (a) the accuracy and completeness of MPH's tax returns; (b) the absence of undisclosed tax liabilities; (c) compliance with applicable tax laws; (d) the treatment of intercompany transactions; (e) the absence of tax-sharing or tax-allocation agreements (other than the existing group arrangements); (f) transfer pricing compliance; and (g) indemnification for pre-closing tax liabilities. The survival period for tax representations and warranties should extend until 60 days after the expiration of the applicable statute of limitations (including any extensions or waivers), consistent with market practice for transactions of this size and complexity. We will coordinate with the M&A team on the drafting of these provisions.

B. Open Items and Next Steps

The following items remain open and require further action by the deal team:

1. Tax basis schedules. Obtain detailed adjusted tax basis schedules from Pemberton Graves LLP (Robert Ainsley, engagement p

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
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I. Executive Summary
Calderwood & Harkness LLP represents Aurelius Global Media Group PLC ("Aurelius" or "AGMG"), a UK public limited company (Companies House No. 08431276), in connection with the proposed carve-out and divestiture of its legacy publishing division. The publishing division operates through Meridian Press Holdings LLC ("MPH"), a Delaware limited liability company (file no. 4521889), which is wholly owned by Aurelius Media Holdings Inc. ("AMH"), a Delaware corporation (file no. 5987324). AMH is, in turn, a wholly owned subsidiary of Aurelius.
The prospective buyer is Pinnacle Ridge Capital Partners Fund IV, L.P. ("PRCP IV"), a Delaware limited partnership (file no. 6234577), which is expected to acquire 100% of the membership interests in MPH through a newly formed acquisition vehicle. PRCP IV is a mid-market private equity fund advised by Pinnacle Ridge Capital Partners LLC. The anticipated enterprise value of the transaction is $480,000,000, representing an implied EV/EBITDA multiple of approximately 5.0x based on MPH's fiscal year 2023 Adjusted EBITDA of $96,000,000. This valuation is broadly consistent with comparable transactions in the legacy publishing and media distribution sector and reflects the declining organic revenue trajectory of the business offset by its stable cash-flow profile and real-asset base.
This memorandum has been prepared for internal use by the Calderwood & Harkness deal team and analyzes the following key tax structuring considerations:
(a) the US federal income tax treatment of MPH as a disregarded entity and the consequences of a membership interest sale;
(b) the potential benefits and mechanics of a Section 338(h)(10) election with respect to MPH's corporate subsidiaries;
(c) the estimated US federal and state tax liability to Seller arising from the transaction;
(d) UK tax considerations, including the Substantial Shareholding Exemption and the controlled foreign company rules;
(e) state and local tax implications across MPH's nexus states; and
(f) transfer tax allocation and exposure arising from the deemed asset sale.
The purpose of this memorandum is to inform deal structuring decisions in advance of the negotiation and drafting of the definitive Membership Interest Purchase Agreement ("MIPA") and ancillary transaction documents. The analysis herein is preliminary and is based on information made available to us as of the date of this memorandum, including preliminary financial data provided by MPH's management team and the Aurelius corporate finance group, as well as discussions with Seller's financial advisor, Haverford Whitmore & Co. All tax estimates are subject to revision as additional facts become available and as the transaction structure is finalized.
II. Current Corporate and Tax Structure
A. Aurelius Group Structure — Relevant Entities
The following entities are relevant to the analysis of the proposed transaction:
Aurelius Global Media Group PLC ("Aurelius" or "AGMG"). Aurelius is the UK-headquartered, publicly listed ultimate parent entity of the Aurelius group of companies. It maintains a Premium Listing on the London Stock Exchange and sponsors a Level II American Depositary Receipt ("ADR") program traded on the Nasdaq Global Select Market. For fiscal year 2023, Aurelius reported consolidated revenue of approximately £3,800,000,000 across its global media, broadcasting, and publishing operations. The company is led by Chief Executive Officer Sir Edmund Hargreaves, KBE, Chief Financial Officer Priya Nandakumar, and General Counsel Claudia Restrepo. Aurelius is a UK tax resident company subject to UK corporation tax on its worldwide profits.
Aurelius Media Holdings Inc. ("AMH"). AMH is a Delaware corporation (file no. 5987324) and a wholly owned subsidiary of Aurelius. AMH serves as the principal US holding entity for Aurelius's North American media and publishing operations. AMH directly holds 100% of the equity of MPH as the sole member of MPH. AMH's registered agent is Crowne Albany Corporation, located at 1209 Orange Street, Wilmington, Delaware 19801. AMH files US federal income tax returns as a C corporation and is included in any applicable consolidated return filings to the extent required under Section 1501 of the Internal Revenue Code.
Meridian Press Holdings LLC ("MPH"). MPH is a Delaware limited liability company (file no. 4521889) with its principal office located at 1180 Avenue of the Americas, 22nd Floor, New York, New York 10036. Its registered agent is Fenmore Health IT Statutory Agent, located at 251 Little Falls Drive, Wilmington, Delaware 19808. AMH is the sole member of MPH. MPH serves as the operational holding company for Aurelius's legacy publishing division. Jonathan Kessler serves as President of MPH, and Angela Moretti serves as Senior Vice President of Finance. As discussed more fully in Section II.B below, MPH is classified as a disregarded entity for US federal income tax purposes.
MPH Subsidiaries Included in the Carve-Out. MPH holds equity interests in the following entities, each of which is included in the proposed carve-out transaction:
(i) Meridian Distribution Services Inc. ("MDS") — a Delaware corporation (file no. 4736201) that operates MPH's network of distribution centers and provides warehousing, fulfillment, and logistics services for the publishing business.
(ii) Bellweather Academic Press Inc. ("Bellweather") — a Delaware corporation (file no. 4801133) that operates the academic and scholarly publishing imprint, focusing on peer-reviewed journals, university-press partnerships, and textbook publishing.
(iii) Foxglove Media LLC ("Foxglove") — a New York limited liability company that operates the Foxglove Periodicals imprint, publishing a portfolio of consumer and trade magazines and associated digital properties.
(iv) Meridian Press Canada ULC ("Meridian Canada") — a British Columbia unlimited liability company that conducts the Canadian operations of the publishing division, including distribution, editorial, and marketing activities within Canada.
The organizational structure relevant to this transaction can be summarized as follows: Aurelius PLC (UK) → AMH (DE Corp) → MPH (DE LLC, disregarded entity) → MDS (DE Corp), Bellweather (DE Corp), Foxglove (NY LLC), and Meridian Canada (BC ULC).
B. Tax Classification of MPH
MPH is a single-member Delaware limited liability company whose sole member is AMH, a corporation. Under the entity classification regulations set forth in Treasury Regulation § 301.7701-3 (the so-called "check-the-box" regulations), a domestic eligible entity that has a single owner and does not affirmatively elect to be classified as a corporation is, by default, disregarded as an entity separate from its owner for US federal income tax purposes. MPH has not filed a Form 8832 (Entity Classification Election) electing to be treated as a corporation and accordingly is treated as a disregarded entity for US federal income tax purposes. As a consequence, all of MPH's assets, liabilities, income, deductions, and credits are treated as directly owned by, and attributable to, AMH for federal income tax purposes.
This classification has significant implications for how the sale of MPH's membership interests is treated for federal income tax purposes. Because MPH is disregarded, the sale of 100% of its membership interests is not treated as a sale of an interest in an entity; rather, it is treated as a sale of the underlying assets of MPH by AMH. This treatment is discussed in detail in Section III.A below.
With respect to MPH's subsidiaries, the following observations are relevant:
• MDS and Bellweather are each incorporated as Delaware corporations and are treated as separate C corporations for US federal income tax purposes. Their assets and liabilities are not treated as directly owned by AMH; rather, AMH (through MPH) holds stock in these entities, and the sale of MPH's membership interests will be treated as a sale of the stock of MDS and Bellweather (absent a Section 338(h)(10) election).
• Foxglove Media LLC is a New York limited liability company. Its entity classification for federal tax purposes depends on the number and nature of its owners. If Foxglove is wholly owned by MPH (a disregarded entity), Foxglove would itself be a disregarded entity under the check-the-box rules, and its assets would be treated as owned by AMH. If Foxglove has other members, it would be classified as a partnership. Based on our preliminary understanding, Foxglove is wholly owned by MPH and is therefore a disregarded entity. This assumption should be confirmed during the due diligence process.
• Meridian Press Canada ULC is a British Columbia unlimited liability company. Under Canadian tax principles, a ULC is generally treated as a flow-through entity — that is, it is transparent for Canadian federal and provincial income tax purposes to the extent of its single member's interest. However, for US federal income tax purposes, the classification of a Canadian ULC is determined under the check-the-box regulations. A ULC organized under British Columbia law is a "per se" entity eligible for check-the-box classification. If no election has been filed, the default classification would depend on whether the ULC is treated as having limited liability (in which case it would default to a corporation classification for a single-member entity). The treatment of the Canadian ULC requires further analysis, including a review of whether any Form 8832 has been filed and the implications under the Canada-US Tax Treaty. We recommend that this analysis be completed promptly.
C. Business Overview and Financial Profile
MPH operates the legacy publishing division of Aurelius through three principal imprints: Meridian Books (trade and consumer publishing), Bellweather Academic (scholarly and academic publishing), and Foxglove Periodicals (consumer and trade magazines). The business encompasses editorial, production, marketing, sales, and distribution functions across North America.
MPH operates a network of 14 distribution centers across North America. Four of these distribution centers are owned in fee simple by subsidiaries of MPH:
• Edison, New Jersey (approximately 280,000 sq. ft.)
• Columbus, Ohio (approximately 210,000 sq. ft.)
• Dallas, Texas (approximately 195,000 sq. ft.)
• Reno, Nevada (approximately 165,000 sq. ft.)
The remaining distribution centers are leased at various locations across the United States and Canada. The business employs approximately 2,400 full-time equivalent employees across its operations.
For fiscal year 2023, MPH reported revenue of $1,140,000,000 and Adjusted EBITDA of $96,000,000, representing an Adjusted EBITDA margin of approximately 8.4%. The legacy publishing segment represents approximately 25% of Aurelius's consolidated revenue. Revenue has declined modestly on an organic basis in recent fiscal years, consistent with industry trends affecting print publishing, though the business has partially offset declines through digital content licensing, subscription revenue, and cost optimization initiatives. The strong cash-flow generation of the division, together with its tangible asset base and established distribution infrastructure, supports the anticipated enterprise value of $480,000,000.
III. US Federal Income Tax Treatment of the Proposed Transaction
A. Sale of Membership Interests in a Disregarded Entity
As discussed in Section II.B above, MPH is a disregarded entity for US federal income tax purposes. The fundamental consequence of this classification is that a sale of 100% of the membership interests in MPH to Buyer is treated, for US federal income tax purposes, as a sale by AMH of all of the underlying assets of MPH, rather than as a sale of an equity interest in an entity. This treatment follows directly from the disregarded entity classification: because MPH does not exist as a separate entity for federal tax purposes, there are no "membership interests" to sell from a tax perspective. Instead, AMH is treated as selling each of the assets that are deemed to be directly owned by it through the disregarded entity.
This deemed asset sale treatment arises by operation of law — no affirmative election or filing by either party is required for this treatment to apply at the MPH level. The seller in the transaction for federal tax purposes is AMH (not MPH), and AMH recognizes gain or loss on the deemed sale of each asset of MPH. The character of such gain or loss — whether ordinary income or capital gain — is determined on an asset-by-asset basis according to the nature of each asset in the hands of AMH. For example, gain on inventory would be ordinary income, gain on depreciable personal property would be subject to depreciation recapture under Sections 1245 and 1250 of the Internal Revenue Code, and gain on capital assets held for more than one year would be long-term capital gain.
It is important to note, however, that the deemed asset sale treatment at the MPH level does not automatically extend to the corporate subsidiaries of MPH. Specifically, with respect to the stock of MDS and Bellweather — both of which are separate C corporations — the sale of the MPH membership interests is treated as a sale of the stock of those subsidiaries by AMH. This is because MDS and Bellweather are respected as separate entities for federal tax purposes; their assets are not treated as directly owned by AMH. Consequently, the gain recognized by AMH on the portion of the purchase price allocated to MDS and Bellweather stock would be treated as capital gain from the sale of stock, and there would be no step-up in the tax basis of the assets held by MDS and Bellweather — unless a Section 338(h)(10) election is made with respect to each of those subsidiaries. The potential for such an election is discussed immediately below.
Similarly, the treatment of the Foxglove Media LLC assets would follow the same principles as MPH if Foxglove is itself a disregarded entity (as we currently believe to be the case): its assets would be treated as part of the overall deemed asset sale. The treatment of the Meridian Canada ULC depends on its entity classification for US tax purposes, as discussed in Section II.B, and is addressed separately in Section VII.
B. Section 338(h)(10) Election — Overview and Benefits
Section 338(h)(10) of the Internal Revenue Code provides a mechanism by which the buyer and seller of a "qualified stock purchase" of a target may jointly elect to treat the stock acquisition as a deemed asset acquisition for federal income tax purposes. When this election is made, the target is treated as having sold all of its assets in a single transaction at fair market value and then liquidated, rather than being treated as having undergone a change in stock ownership. The economic effect is that the buyer obtains a stepped-up tax basis in the target's assets — equal to the purchase price allocated to those assets — while the seller recognizes gain as if the target had sold its assets and distributed the proceeds in liquidation.
In this transaction, the acquisition of the stock of MDS and Bellweather (which is treated as occurring through the purchase of the MPH membership interests, as discussed in Section III.A) would qualify as "qualified stock purchases" within the meaning of Section 338(d)(3) if the requirements of that provision are met. A "qualified stock purchase" requires the acquisition by a purchasing corporation of at least 80% of the total voting power of all classes of stock entitled to vote and at least 80% of the total value of all outstanding stock of the target, within a 12-month acquisition period. Because Buyer (through its acquisition vehicle) will acquire 100% of the MPH membership interests in a single transaction — and AMH holds 100% of the stock of both MDS and Bellweather through MPH — the 80% threshold is satisfied, and the acquisitions should constitute qualified stock purchases.
Benefits of a Section 338(h)(10) election in the context of this transaction include the following:
For Buyer (Pinnacle Ridge):
The primary benefit of the Section 338(h)(10) election to Buyer is a step-up in the tax basis of MDS's and Bellweather's assets to fair market value. This step-up results in increased depreciation and amortization deductions for Buyer in post-closing taxable periods, which reduces Buyer's future taxable income and enhances after-tax cash flow. The benefit is particularly valuable with respect to intangible assets — including goodwill, customer relationships, author contracts and publishing rights, trade names (such as "Meridian Press," "Bellweather Academic," and "Foxglove"), and ISBN prefix assignments — which can be amortized over a 15-year period under Section 197 of the Internal Revenue Code. Given the significant goodwill and intangible value embedded in the MPH business, the present value of the amortization benefit to Buyer is expected to be substantial.
Additionally, for tangible depreciable assets — including distribution center equipment, warehouse fixtures, printing presses, and IT infrastructure — the step-up to fair market value provides an increased depreciation base, potentially eligible for bonus depreciation or accelerated cost recovery under the Modified Accelerated Cost Recovery System (MACRS). The combined amortization and depreciation benefit provides Buyer with a meaningful tax shield that enhances the internal rate of return on the investment.
For Seller (AMH):
The Section 338(h)(10) election results in the targets (MDS and Bellweather) being treated as having sold their assets and liquidated. AMH, as the deemed selling shareholder, recognizes gain on the deemed asset sale at the subsidiary level, with the character of gain determined asset-by-asset. In certain scenarios, this deemed asset sale treatment can be more favorable to Seller than stock sale treatment — for example, if the targets hold assets with a tax basis in excess of AMH's basis in the target stock (though this is not typically the case). However, for a C corporation seller such as AMH, the rate differential between ordinary income and capital gain is minimal, as both are taxed at the 21% federal corporate rate. Accordingly, the primary economic benefit of the Section 338(h)(10) election flows to Buyer, and Seller typically negotiates consideration — either in the form of a higher purchase price or a tax indemnity mechanism — in exchange for agreeing to the election.
Importantly, the Section 338(h)(10) election eliminates the double taxation that would otherwise result from the combination of (i) a stock-level gain recognized by AMH and (ii) potential built-in gain at the corporate subsidiary level that would be realized in a subsequent asset disposition by Buyer. By treating the transaction as a deemed asset sale followed by a deemed liquidation, the election ensures that only a single level of corporate-level tax is imposed on the transaction, with the gain recognized at the AMH level and no additional tax imposed on the deemed liquidation of MDS or Bellweather.
Based on preliminary discussions reflected in the indicative term sheet, Buyer (Pinnacle Ridge) is expected to request a Section 338(h)(10) election with respect to both MDS and Bellweather. We recommend that Seller agree to the election, subject to the following conditions:
(i) the purchase price allocation among asset classes shall be mutually agreed between Buyer and Seller and documented in a separate Section 338(h)(10) Election Agreement to be executed at signing of the MIPA;
(ii) Buyer shall bear the incremental tax cost, if any, to Seller resulting from the election (i.e., any increase in Seller's tax liability attributable to the election as compared to stock sale treatment); and
(iii) the parties shall file consistent allocations on their respective tax returns and cooperate in the preparation and filing of all required forms and elections.
C. Mechanics of the Section 338(h)(10) Election
The mechanics of the Section 338(h)(10) election require the parties to comply with the following filing and documentation requirements:
IRS Form 8023. The parties must jointly file IRS Form 8023 (Elections Under Section 338 for Corporations Making Qualified Stock Purchases) to make the Section 338(h)(10) election with respect to each target (MDS and Bellweather). Form 8023 must be filed no later than the 15th day of the 9th month beginning after the month in which the "acquisition date" occurs — that is, the date on which the qualified stock purchase is completed. For a closing expected in the third or fourth quarter of 2024, the filing deadline would fall in the second or third quarter of 2025. The election is irrevocable once filed. Both the purchasing corporation (Buyer's acquisition vehicle) and the selling consolidated group member (AMH) must sign Form 8023.
IRS Form 8883. Each party must file IRS Form 8883 (Asset Allocation Statement Under Section 338) to report the allocation of the aggregate deemed sales price ("ADSP") and the adjusted grossed-up basis ("AGUB") among the target's assets. The allocation must follow the residual method prescribed by Treasury Regulation § 1.338-6, which requires the purchase price to be allocated among asset classes in the following order of priority:
• Class I: Cash and general deposit accounts (including checking and savings accounts, but not certificates of deposit).
• Class II: Actively traded personal property within the meaning of Section 1092(d)(1) and certificates of deposit and foreign currencies.
• Class III: Accounts receivable, mortgages, and credit card receivables that arise in the ordinary course of business.
• Class IV: Inventory.
• Class V: All assets not included in any other class — this is a broad residual category that includes fixed assets, equipment, distribution center infrastructure, printing presses, warehouse fixtures, vehicles, IT hardware, and other tangible personal property.
• Class VI: Section 197 intangibles other than goodwill and going concern value — including trademarks (such as "Meridian Press," "Bellweather Academic," and "Foxglove"), trade names, author contracts, customer lists and relationships, non-compete agreements, ISBN prefix assignments, publishing rights, and similar intangible assets.
• Class VII: Goodwill and going concern value — the residual amount after allocation to all other classes.
The allocation must be agreed between Buyer and Seller and reflected consistently on their respective federal and state income tax returns. Any disagreement between the parties as to the allocation should be resolved through the dispute resolution mechanism set forth in the Section 338(h)(10) Election Agreement. We recommend that the allocation be supported by a third-party valuation report prepared by a qualified appraiser, which will provide an independent basis for the allocation and reduce the risk of challenge by the Internal Revenue Service.
The Section 338(h)(10) Election Agreement to be executed at signing of the MIPA should address, at a minimum, the following matters: (i) the parties' agreement to make the election; (ii) the methodology and timetable for agreeing on the purchase price allocation; (iii) the parties' obligations with respect to the preparation and filing of Forms 8023 and 8883; (iv) representations regarding the qualification of the transaction as a qualified stock purchase; (v) cooperation and information-sharing obligations; and (vi) indemnification for any incremental tax cost to Seller. We will prepare a draft of this agreement for review by the deal team.
IV. Estimated US Tax Liability to Seller
A. Estimated Taxable Gain
The estimated taxable gain to Seller arising from the proposed transaction is calculated as follows:
The estimated aggregate adjusted tax basis of $252,000,000 is based on a preliminary analysis of historical cost, accumulated depreciation, and amortization schedules for MPH's assets, as well as AMH's adjusted tax basis in the stock of MDS and Bellweather (or, in the case of a Section 338(h)(10) election, the aggregate adjusted tax basis of MDS's and Bellweather's assets). This estimate is preliminary and requires confirmation through a detailed review of the relevant tax records and schedules. We recommend that the engagement team coordinate with Seller's independent auditor, Pemberton Graves LLP (Robert Ainsley, engagement partner), to obtain the following:
(i) a schedule of the adjusted tax basis of each material asset of MPH as of the anticipated closing date;
(ii) depreciation and amortization schedules for all depreciable and amortizable assets;
(iii) a schedule of AMH's adjusted tax basis in the stock of MDS and Bellweather;
(iv) historical cost and accumulated depreciation schedules for MDS's and Bellweather's assets; and
(v) any relevant elections, basis adjustments, or other items that may affect the tax basis calculations.
It is important to note that the exact amount of taxable gain will depend on several factors that will not be determined until closing, including:
• the final purchase price after closing adjustments, including the net working capital true-up;
• closing indebtedness of approximately $62,500,000, consisting of a $50,000,000 intercompany promissory note payable by MPH to AMH and approximately $12,500,000 in capital lease obligations;
• closing cash of approximately $8,200,000;
• transaction expenses of approximately $4,700,000 (consisting of financial advisory fees, legal fees, accounting fees, and other transaction-related costs); and
• the final purchase price allocation among asset classes, which will determine the character of the gain recognized (ordinary income versus capital gain) on an asset-by-asset basis.
B. Estimated Tax Rate and Liability
The estimated tax liability to Seller is calculated by applying the applicable federal and state tax rates to the estimated taxable gain:
• Federal corporate income tax rate: 21% (as enacted by the Tax Cuts and Jobs Act of 2017 and codified in Section 11(b) of the Internal Revenue Code).
• Applicable state and local income tax rates: The effective state tax rate depends on the apportionment of the gain across the states in which AMH and MPH have nexus. Based on our preliminary analysis of MPH's operations and the location of its assets, employees, and revenue-generating activities, we estimate a blended effective state income tax rate of approximately 3% to 5% after accounting for the federal deductibility of state income taxes (which is no longer available for C corporations under current law — note: the TCJA eliminated the federal deduction for state and local taxes only for individuals; C corporations continue to deduct state income taxes). Taking the federal benefit of the state income tax deduction into account, the net incremental state tax rate is somewhat lower.
• Blended federal/state effective tax rate: Approximately 21% (inclusive of state income taxes net of the federal deduction). This blended rate reflects the interaction between the 21% federal rate and the incremental state tax burden after federal benefit. The blended rate will be refined once detailed state-by-state apportionment modeling is completed.
Estimated US tax liability to Seller:
$228,000,000 × 21% ≈ $48,000,000
This estimated tax liability of approximately $48,000,000 is subject to refinement based on: (i) the final purchase price allocation, which will determine the mix of ordinary income and capital gain (though, as noted, for a C corporation such as AMH, both categories are taxed at the same 21% federal rate); (ii) the actual state apportionment factors applicable to the gain; (iii) any available tax attributes at the AMH level, including net operating loss carryforwards, credit carryforwards, or other deductions that could offset the gain; and (iv) the final closing adjustments to the purchase price.
We note that the rate differential between ordinary income and capital gain is not significant for AMH as a C corporation at the federal level. However, at the state level, certain states may impose different rates or different apportionment methods for capital gains versus ordinary business income, which could affect the overall state tax burden. This issue will be addressed in the detailed state-by-state modeling.
C. Intercompany Note Treatment
MPH is party to a $50,000,000 intercompany promissory note payable to AMH (the "Intercompany Note"). The Intercompany Note is expected to be repaid at or immediately prior to closing as part of the pre-closing restructuring steps.
Because MPH is a disregarded entity for US federal income tax purposes, the Intercompany Note is disregarded for federal tax purposes. The note is treated as an obligation between a branch and its owner — that is, between AMH and itself — and therefore has no independent existence for federal income tax purposes. Accordingly, the "repayment" of the Intercompany Note at closing is a non-event for federal income tax purposes: no gain or loss is recognized by either AMH or MPH on the repayment, and the repayment does not affect the computation of taxable gain on the deemed asset sale.
For state tax purposes, the treatment of the Intercompany Note may vary. Certain states may not follow the federal disregarded entity classification or may respect the note as a separate obligation for purposes of their own corporate income tax or franchise tax. In particular, states that impose entity-level taxes on LLCs (such as California, if nexus were present) may treat the note as a genuine intercompany obligation. This issue should be evaluated on a state-by-state basis as part of the detailed state tax analysis.
V. UK Tax Considerations
A. Substantial Shareholding Exemption (SSE) Analysis
Aurelius Global Media Group PLC is a UK tax resident company. While the disposal of the publishing division occurs at the AMH level — a US subsidiary of Aurelius — it is necessary to analyze the upstream UK tax consequences of the transaction, including the potential application of the UK controlled foreign company ("CFC") rules and the availability of the Substantial Shareholding Exemption ("SSE").
Transaction Structure and UK Tax Exposure. In the proposed transaction, it is AMH (a Delaware corporation) that is selling the membership interests in MPH. The sale proceeds will be received by AMH, and the taxable gain will be recognized at the AMH level for US federal income tax purposes. Aurelius PLC is not directly disposing of any shares or assets in the transaction; rather, the value of Aurelius's investment in AMH will be reduced by the removal of the MPH publishing division from AMH's asset base.
For UK tax purposes, no direct UK corporate tax liability arises on the disposal because:
(a) the disposal is made by AMH, a non-UK entity that is not subject to UK corporation tax on its income or gains (absent a UK permanent establishment);
(b) the assets being sold — the MPH membership interests, and, on a deemed basis, the underlying assets of MPH — are located in the United States and do not constitute UK-situs property; and
(c) there is no disposal of shares in a UK entity, and therefore the UK capital gains tax regime does not apply to the transaction directly.
SSE Analysis. The Substantial Shareholding Exemption, enacted under Schedule 7AC of the Taxation of Chargeable Gains Act 1992, provides an exemption from UK corporation tax on gains arising on the disposal of shares by a company that satisfies the following principal conditions:
(i) the disposing company holds (or has held within the preceding two years) at least 10% of the ordinary share capital of the company being disposed of;
(ii) the shares have been held for a continuous period of at least 12 months within the six years preceding the disposal;
(iii) the company whose shares are being disposed of is a trading company or the holding company of a trading group; and
(iv) the disposing company is a trading company or a member of a trading group (this condition has been relaxed for "institutional investors" and companies meeting certain qualifying conditions under amendments effective from April 2017).
In this transaction, Aurelius PLC is not directly disposing of shares in AMH or in any other entity. Accordingly, the SSE does not apply directly to the transaction as structured. However, the SSE analysis is relevant for the following reasons: (i) it supports the conclusion that even if the transaction were restructured to involve a share disposal at a higher level in the corporate chain — for example, a sale of AMH stock by Aurelius PLC — the SSE would likely be available to exempt the resulting gain, given Aurelius's long-standing holding of 100% of AMH and AMH's status as a holding company of a trading group; and (ii) it provides comfort that no UK tax exposure would arise in alternative transaction structures that may be considered.
CFC Considerations. The UK CFC rules, set forth in Part 9A of the Taxation (International and Other Provisions) Act 2010 ("TIOPA 2010"), impose a charge to UK corporation tax on a UK-resident company that controls a controlled foreign company, to the extent that the CFC has "chargeable profits" arising from activities that have been artificially diverted from the UK. AMH is a CFC of Aurelius PLC because Aurelius PLC holds more than 50% of the shares (and indeed 100% of the shares) of AMH.
The gain recognized by AMH on the deemed asset sale could, in principle, constitute "chargeable profits" of AMH for CFC purposes. However, the CFC rules provide a number of exemptions that may apply to exclude the gain from the CFC charge:
• Entity-level exemption: If AMH's total accounting profits (or, more precisely, its "assumed total profits") do not exceed the threshold amount or if AMH satisfies other entity-level exemptions.
• Excluded territories exemption: The United States is generally an "excluded territory" for CFC purposes, provided that AMH satisfies the conditions of the excluded territories regulations (including that AMH's income is subject to tax in the US at a rate of at least 75% of the UK corporation tax rate — given the 21% US rate and the 25% UK rate, this condition is satisfied: 21% / 25% = 84%, which exceeds 75%).
• Low-profit exemption: If AMH's accounting profits do not exceed £500,000 (or £50,000 for the de minimis exemption), though this is unlikely to apply given the magnitude of the gain.
Based on our preliminary analysis, the gain recognized by AMH on the sale of the MPH membership interests should not give rise to a CFC charge in the UK, provided that AMH satisfies the excluded territories exemption for the United States. However, this conclusion requires confirmation from Aurelius's UK tax advisors, who are better positioned to evaluate AMH's overall CFC profile and any interactions with other provisions of the UK CFC rules.
Conclusion on UK Tax. No direct UK corporate tax liability is expected to arise on the proposed disposal. The SSE analysis supports the conclusion that even in an alternative structure involving a share disposal at a higher level, the exemption would likely be available. We recommend coordinating with Aurelius's UK tax counsel — understood to be Whitford Chambers LLP — to confirm the CFC analysis and to ensure that no other UK tax provisions (including the diverted profits tax or the anti-avoidance rules) are triggered by the transaction.
B. Withholding Tax Considerations
The proposed transaction does not give rise to any US or UK withholding tax obligations, based on the following analysis:
US Withholding Tax. The sale of membership interests in a US LLC by a US corporation (AMH) does not trigger any US withholding tax obligation. US withholding taxes on dispositions of US interests are generally imposed under FIRPTA (the Foreign Investment in Real Property Tax Act, Section 1445 of the Internal Revenue Code) on sales by foreign persons of US real property interests. Because AMH is a domestic corporation (i.e., a corporation organized in the United States), FIRPTA withholding does not apply to the sale. Nevertheless, as a customary closing deliverable, AMH will provide a non-foreign affidavit (also known as a "FIRPTA certificate") to Buyer at closing, certifying AMH's US tax identification number and confirming that AMH is not a "foreign person" within the meaning of Section 1445. This certificate will eliminate any withholding obligation on the part of Buyer and is a standard requirement in transactions involving the sale of membership interests in entities that may hold US real property interests.
UK Withholding Tax. No UK withholding taxes arise on the transaction as structured. The sale proceeds flow from Buyer to AMH, a US entity, and do not constitute UK-source income subject to UK withholding. There are no dividends, interest payments, or royalties being paid to or from a UK entity in connection with the closing of the transaction that would trigger UK withholding obligations.
VI. State and Local Tax Implications
A. Nexus States and Apportionment
AMH and MPH have nexus for state and local income tax purposes in multiple jurisdictions by virtue of MPH's physical presence, employees, property, and revenue-generating activities. The following is a summary of the principal nexus states and the key considerations applicable to each:
New Jersey. MPH operates a distribution center at 45 Fieldcrest Avenue, Edison, New Jersey 08837. This facility, together with MPH's employees and tangible personal property located in New Jersey, establishes nexus for New Jersey corporate business tax ("CBT") purposes. AMH's apportioned gain from the deemed asset sale will be subject to the New Jersey CBT. New Jersey imposes a corporate income tax at a rate of 9% on allocated entire net income (with a surtax of 2.5% for taxpayers with allocated entire net income exceeding $1,000,000, resulting in an effective rate of 11.5% for larger taxpayers). New Jersey generally conforms to the federal Section 338(h)(10) election. The apportionment of gain to New Jersey will be determined based on New Jersey's single sales factor apportionment formula, with sourcing rules applicable to the sale of intangible property and business assets.
Ohio. MPH operates a distribution center at 2200 Westbelt Drive, Columbus, Ohio 43228. Ohio has replaced its traditional corporate franchise/income tax with the Commercial Activity Tax ("CAT"), which is a gross receipts tax imposed at a rate of 0.26% on taxable gross receipts exceeding $1,000,000. The critical question for Ohio purposes is whether the sale proceeds from the deemed asset sale constitute "gross receipts" for CAT purposes. Under Ohio Rev. Code § 5751.01, "gross receipts" generally includes receipts from the sale of tangible personal property, services, and other business activities, but certain exclusions may apply (including exclusions for casual or isolated sales). The application of the CAT to gain from the sale of a business division requires careful analysis. Ohio repealed its corporate franchise/income tax effective for tax year 2014, so no Ohio income tax would apply to the gain, but the CAT implications must be evaluated.
Texas. MPH operates a distribution center at 8700 Freeport Parkway, Dallas, Texas 75063. Texas imposes a franchise (margin) tax on entities doing business in Texas. The margin tax is computed based on "total revenue" minus the greater of cost of goods sold, compensation, or a 30% standard deduction. Gain on the sale of business assets may be included in "total revenue" for margin tax purposes, though the treatment depends on the specific category of assets sold and the Texas Comptroller's interpretation of the margin tax rules. The franchise tax rate is 0.375% for entities primarily engaged in retail or wholesale trade and 0.75% for other entities. Texas does not impose a separate corporate income tax.
Nevada. MPH operates a distribution center at 1400 Scheels Drive, Reno, Nevada 89502. Nevada does not impose a corporate income tax. However, Nevada does impose a Commerce Tax on business entities with Nevada gross revenue exceeding $4,000,000. The Commerce Tax rate varies by industry but is generally in the range of 0.051% to 0.331%. The question is whether the sale proceeds from the deemed asset sale would be included in "Nevada gross revenue" for Commerce Tax purposes. If so, the Commerce Tax exposure would be relatively modest given the low rate.
New York. MPH maintains its principal office at 1180 Avenue of the Americas, 22nd Floor, New York, New York 10036, and Foxglove Media LLC is organized under New York law. These connections establish nexus for the New York State corporate franchise tax under Article 9-A of the New York Tax Law. AMH's apportioned gain from the deemed asset sale will be subject to New York State corporate franchise tax at a rate of 7.25% on business income (with potential additional rates for larger taxpayers). Additionally, if AMH is deemed to be "doing business" in New York City, the gain could be subject to the New York City General Corporation Tax at a rate of 8.85%. New York generally conforms to the federal Section 338(h)(10) election. Apportionment is based on a single sales factor formula.
Delaware. MPH, MDS, and Bellweather are all incorporated or organized in Delaware. Delaware does not impose a corporate income tax on entities that earn income outside the state, and the sale of MPH membership interests by AMH — a Delaware holding company — should not give rise to Delaware corporate income tax liability, provided that the income is not derived from Delaware sources. However, the Delaware annual franchise tax applies to Delaware-incorporated entities, computed based on either the authorized shares method or the assumed par value capital method. The franchise tax is a flat annual fee and is not based on income.
British Columbia / Canada. Meridian Press Canada ULC operates in British Columbia, Canada. The Canadian federal and provincial tax implications of the carve-out of the Canadian subsidiary are discussed separately in Section VII below.
Other States. MPH operates leased warehouse and office locations at approximately eight additional sites across the United States. A nexus analysis is required for each state in which these facilities are located to determine whether AMH has filing obligations and potential income tax liability in those states. The specific locations of these facilities have been requested from MPH's management and are expected to be provided in connection with the tax due diligence process.
B. Section 338(h)(10) State Conformity
Not all states conform to the federal Section 338(h)(10) election, and the treatment of the election varies by jurisdiction. The following is a summary of conformity in the principal nexus states:
• New York: Generally conforms to the federal Section 338(h)(10) election. New York respects the election and treats the transaction as a deemed asset sale for state corporate franchise tax purposes.
• New Jersey: Generally conforms to the federal Section 338(h)(10) election. New Jersey follows the federal treatment and allows the election to apply for CBT purposes.
• Ohio: The conformity question is of limited relevance for Ohio given the replacement of the corporate income tax with the CAT, which is a gross receipts tax. The CAT analysis focuses on whether the sale proceeds constitute gross receipts, regardless of whether the transaction is treated as an asset sale or stock sale.
• Texas: The Texas franchise (margin) tax has unique rules for asset versus equity transactions. Texas may not fully conform to the federal Section 338(h)(10) election, and the treatment of the election for margin tax purposes requires further analysis. Specifically, the margin tax computation is based on "total revenue" as reported on the entity's federal return, and the classification of the transaction (asset sale versus stock sale) may affect the computation of total revenue differently under Texas rules than under federal rules.
• Nevada: Conformity is not relevant for Nevada income tax purposes because Nevada does not impose an income tax. The Commerce Tax analysis focuses on gross revenue, and the treatment of the election does not directly affect the Commerce Tax computation.
A detailed state-by-state analysis is required to determine the incremental state tax impact of making the Section 338(h)(10) election for MDS and Bellweather as compared to stock sale treatment. This analysis should take into account the apportionment factors (sales, payroll, and property) at the MPH, MDS, and Bellweather level, which will determine the allocation of gain across the nexus states.
C. Estimated State Tax Impact
Based on our preliminary analysis, the blended effective state income tax rate applicable to the gain from the transaction, after accounting for the federal deduction for state income taxes, is estimated at approximately 3% to 5% of apportioned gain. This blended rate is included in the overall blended federal/state effective tax rate of approximately 21% used in the estimated total US tax liability calculation of $48,000,000 set forth in Section IV.B above.
The actual state tax liability will depend on the specific apportionment formulas, filing methodologies (separate return versus combined/unitary filing), and applicable rates in each nexus state. Detailed state-by-state modeling will be performed once the purchase price allocation is finalized and complete apportionment data (revenue, payroll, and property) is obtained from MPH's management and Seller's auditor.
VII. Canadian Tax Considerations
A. Meridian Press Canada ULC
Meridian Press Canada ULC ("Meridian Canada") is a British Columbia unlimited liability company that conducts the Canadian operations of the publishing division. As noted in Section II.B, a ULC organized under British Columbia law is a flow-through entity for Canadian federal and provincial income tax purposes, meaning that its income and gains are generally attributed to its members rather than being taxed at the entity level. This hybrid structure — transparent for Canadian tax purposes but potentially opaque for US tax purposes under the check-the-box regulations — creates a number of cross-border tax issues that must be carefully analyzed.
Canadian Tax Consequences of the Transaction. The transfer of the MPH membership interests to Buyer may trigger deemed disposition rules at the Canadian subsidiary level. Under Canadian tax law, a change in the ultimate beneficial ownership of Meridian Canada could give rise to a deemed year-end for the ULC, potentially triggering the recognition of accrued gains on Canadian-situs assets. Additionally, if the transaction is treated as an acquisition of control of Meridian Canada (within the meaning of the Income Tax Act (Canada)), certain restrictions may apply to the use of pre-acquisition tax attributes, including non-capital loss carryforwards and investment tax credits.
Canadian Federal and Provincial Tax. To the extent that any gain is recognized at the Canadian level, Meridian Canada's income would be subject to Canadian federal corporate income tax (currently at a rate of 15% for general corporations) and British Columbia provincial corporate income tax (currently at a rate of 12% on income exceeding the small business threshold). The combined federal/provincial rate for general corporate income in British Columbia is approximately 27%.
Canada-US Tax Treaty. The Canada-United States Tax Convention (1980), as amended by subsequent protocols, provides rules for the elimination of double taxation on income earned by residents of one country in the other country. To the extent that any portion of the gain from the deemed asset sale is allocable to Canadian assets or Canadian operations, the Treaty's provisions regarding the taxation of business profits (Article VII) and capital gains (Article XIII) must be analyzed to ensure that the gain is not subject to double taxation in both the US and Canada. Article XIII generally grants the source country (Canada) the right to tax gains from the alienation of real property situated in Canada and gains from the alienation of property forming part of the business property of a permanent establishment in Canada, while other capital gains are generally taxable only in the country of residence of the alienator.
Recommendations. Given the complexity of the cross-border tax issues associated with Meridian Canada, we recommend that Aurelius engage Canadian tax counsel to advise on:
(i) the Canadian federal and provincial tax consequences of the sale of the MPH membership interests, including any deemed disposition or acquisition of control implications at the Meridian Canada level;
(ii) any Canadian withholding obligations that may arise on payments made in connection with the transaction (including potential withholding under Section 116 of the Income Tax Act (Canada) on the disposition of "taxable Canadian property");
(iii) the interaction between the US and Canadian tax treatment of the transaction under the Canada-US Tax Treaty, and any steps that should be taken to minimize the risk of double taxation; and
(iv) Canadian Competition Act clearance implications for the acquisition of the Canadian subsidiary (noting that Competition Act pre-merger notification and clearance is expected to be a closing condition under the MIPA).
We will coordinate with Canadian counsel as soon as they are retained and will incorporate their analysis into the overall tax structuring framework for the transaction.
VIII. Transfer Taxes
A. Overview
The sale of membership interests in a Delaware limited liability company is generally not subject to state transfer taxes in most jurisdictions. Transfer taxes — including real property transfer taxes, deed recording taxes, and stamp duties — are typically imposed on the transfer of real property or, in some states, on the transfer of a controlling interest in an entity that owns real property. Because the proposed transaction is structured as a sale of membership interests (rather than a direct sale of real property), the threshold question is whether the transfer of the MPH membership interests triggers transfer tax obligations in the jurisdictions where MPH and its subsidiaries own real property.
However, the analysis is complicated by the fact that the transaction is treated as a deemed asset sale for federal income tax purposes (and potentially for state tax purposes) by virtue of MPH's disregarded entity status and the potential Section 338(h)(10) elections for MDS and Bellweather. Certain states may treat the deemed asset sale as a transfer of real property for transfer tax purposes, even though no actual conveyance of real property occurs. Additionally, several states impose "controlling interest" transfer taxes on transfers of a controlling interest (typically 50% or more) in an entity that owns real property, regardless of whether the transaction is structured as an asset sale or equity sale.
Real Property Transfer Tax Analysis. The owned distribution centers (Edison, NJ; Columbus, OH; Dallas, TX; and Reno, NV) may trigger real property transfer tax concerns in the following jurisdictions:
• New Jersey: New Jersey imposes a realty transfer fee under N.J.S.A. § 46:15-7 on the recording of deeds and other instruments evidencing the transfer of real property. In addition, New Jersey imposes a controlling interest transfer tax under N.J.S.A. § 46:15-7.2 on the transfer of a controlling interest (defined as more than 50% of the total fair market value of all classes of stock or ownership interests) in an entity that owns, directly or indirectly, a controlling interest in real property (defined as a classified real property interest with a fair market value of more than $1,000,000 or an unclassified interest). The transfer of 100% of the MPH membership interests to Buyer may constitute a transfer of a controlling interest in an entity that owns real property in New Jersey (the Edison distribution center). The controlling interest transfer tax rate is 1% of the equalized assessed value of the real property. Analysis is required to determine the applicability and amount of the tax.
• Ohio: Ohio imposes a real property conveyance fee under Ohio Rev. Code § 322.02 on the transfer of real property. The fee is imposed at the county level and is typically calculated based on the sale price of the real property. The transfer of a controlling interest in an entity that owns Ohio real property may also trigger the conveyance fee under Ohio Rev. Code § 319.203 (the "controlling interest" provision). Analysis is required to determine the applicability of the fee to the transfer of the MPH membership interests and the Columbus distribution center.
• Texas: Texas does not impose a general real property transfer tax or stamp tax on the sale of real property at the state level. County-level recording fees are minimal and are assessed on the recordation of deeds and other instruments. The transfer of membership interests in an LLC that owns Texas real property is generally not subject to transfer tax in Texas.
• Nevada: Nevada imposes a real property transfer tax under NRS § 375.020 on the transfer of real property within the state. The tax is imposed at a rate of $1.95 per $500 of value (or fraction thereof) on the first $100,000 of value, with additional rates applicable to larger transfers. The transfer of a controlling interest in an entity that owns Nevada real property may also trigger the transfer tax. Analysis is required to determine the applicability of the tax to the transfer of the MPH membership interests and the Reno distribution center.
Allocation of Transfer Taxes. Per the anticipated terms of the definitive MIPA, transfer taxes arising from the transaction are to be borne 50/50 by Buyer and Seller. This allocation should be reflected in the MIPA and in the closing settlement statement.
Recommendation. We recommend engaging local counsel or a title agent in each applicable jurisdiction to confirm the transfer tax exposure and to prepare any required filings or exemption certificates. We understand that Foxworth Daniels & Co. of Wilmington, Delaware has been retained as the lien search agent for the transaction; Foxworth Daniels may also be able to assist with the transfer tax analysis in certain jurisdictions or to recommend local counsel for this purpose.
IX. Tax Structuring Recommendations
A. Summary of Recommendations
Based on the foregoing analysis, we make the following preliminary recommendations for the tax structuring of the proposed transaction:
1. Proceed with membership interest sale structure. The sale of 100% of the MPH membership interests is the preferred transaction structure from a tax perspective. This structure provides a deemed asset sale at the MPH level by virtue of MPH's disregarded entity classification, resulting in a step-up in the tax basis of MPH's assets for Buyer, while preserving a clean legal transfer at the entity level. The membership interest sale also minimizes the need for third-party consents and avoids the complexity and cost associated with a direct asset purchase agreement, including the need to assign individual contracts, permits, and licenses.
2. Agree to Section 338(h)(10) election for MDS and Bellweather. We recommend that Seller agree to Buyer's expected request for a Section 338(h)(10) election with respect to MDS and Bellweather, subject to the following conditions: (a) the purchase price allocation among asset classes shall be mutually agreed between Buyer and Seller and documented in a separate Section 338(h)(10) Election Agreement; (b) Buyer shall bear any incremental tax cost to Seller resulting from the election as compared to stock sale treatment; and (c) both parties shall execute the required IRS forms and file consistent allocations on their respective tax returns. The election provides significant economic value to Buyer through the step-up in asset basis and should be a negotiating chip for Seller in the purchase price or indemnity discussions.
3. UK SSE / CFC analysis. We recommend coordinating with Aurelius's UK tax advisors to confirm that no UK corporation tax liability arises from the transaction. Based on our preliminary analysis, no direct UK corporate tax is expected: the disposal is made by AMH (a non-UK entity), the assets are located outside the UK, and the SSE would be available if the transaction were restructured as a share disposal. The CFC analysis should confirm that the excluded territories exemption for the United States is available to shield the gain from a CFC charge.
4. State tax planning. We recommend performing a detailed state-by-state modeling exercise to quantify the state income tax exposure and identify opportunities to minimize the state tax burden through apportionment optimization. This analysis should confirm conformity with the Section 338(h)(10) election in each nexus state and evaluate the potential for combined/unitary filing to reduce the overall state effective tax rate. The analysis should also address the Ohio CAT, Texas margin tax, and Nevada Commerce Tax implications in detail.
5. Canadian subsidiary. We recommend engaging Canadian tax counsel promptly to conduct a detailed analysis of the Canadian federal and provincial tax consequences of the transaction as it relates to Meridian Press Canada ULC. The Canadian analysis should address deemed disposition issues, withholding obligations, and Canada-US Tax Treaty implications, as well as Competition Act clearance requirements for the Canadian subsidiary.
6. Transfer taxes. We recommend conducting a jurisdiction-by-jurisdiction analysis of real property transfer tax and controlling interest transfer tax exposure in New Jersey, Ohio, Texas, and Nevada. The transfer tax analysis should identify any available exemptions or exclusions and quantify the estimated transfer tax liability in each jurisdiction. The anticipated 50/50 sharing arrangement between Buyer and Seller should be reflected in the MIPA.
7. FIRPTA certificate. We will prepare a non-foreign affidavit (FIRPTA certificate) for AMH to deliver to Buyer at closing, certifying that AMH is not a "foreign person" within the meaning of Section 1445 of the Internal Revenue Code. This is a customary closing deliverable that will eliminate any FIRPTA withholding obligation on the part of Buyer.
8. Tax indemnification provisions. In the MIPA, we recommend including comprehensive tax representations, warranties, and indemnification provisions. These provisions should address, at a minimum: (a) the accuracy and completeness of MPH's tax returns; (b) the absence of undisclosed tax liabilities; (c) compliance with applicable tax laws; (d) the treatment of intercompany transactions; (e) the absence of tax-sharing or tax-allocation agreements (other than the existing group arrangements); (f) transfer pricing compliance; and (g) indemnification for pre-closing tax liabilities. The survival period for tax representations and warranties should extend until 60 days after the expiration of the applicable statute of limitations (including any extensions or waivers), consistent with market practice for transactions of this size and complexity. We will coordinate with the M&A team on the drafting of these provisions.
B. Open Items and Next Steps
The following items remain open and require further action by the deal team:
1. Tax basis schedules. Obtain detailed adjusted tax basis schedules from Pemberton Graves LLP (Robert Ainsley, engagement p

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