2008 Registration Document - Rexel

14. Financial information concerning the assets andliabilities, financial position and profits and lossesof Rexelbefore the administrative court. At the date of this Documentde Référence, the administration and the company are closeto a settlement resulting in a minimal tax burden.Rexel Deutschland Elektrofachgrosshandel GmbH(Germany)Rexel Deutschland Elektrofachgrosshandel GmbH wasthe subject of a tax reassessment relating to the 1997 to2001 financial years. The treatment of a sale and leasebacktransaction with respect to value added tax (€0.8 million)is still under discussion with the tax authorities. In addition,the outcome of the tax audit in relation to the 2002 to 2006financial years is expected shortly. The company wastransferred to Sonepar Deutschland in 2008. The transferagreement includes a liability warranty.14.6.1.2 Litigation not covered by the liabilitywarranty granted by the PPR groupSvenska Elgrossist AB Selga (Sweden)The tax authorities denied the deductibility of services(€1.1 million) invoiced by Rexel Development in 2005. Thecompany brought a claim before the relevant court.Rexel DéveloppementIn 2008, Rexel Développement was subject to a tax auditfor the financial years 2005 and 2006.In December 2008, the tax authorities notified a proposedrectification arguing that services invoiced in 2005, inthe context of the acquisition of Rexel Distribution, for anamount of €33.6 million, by Clayton Distribution & RiceInc., Eurazeo and Merrill Lynch Global Partner Inc., havenot been entered into in the best interest of the Company.This proposal results in an amount of €22 million in taxesapproximately, including €11.6 million of company tax,€6.6 million in VAT, €1 million in withholding tax and€3 million approximately for late payment penalties andinterest. The company challenges the allegations of the taxauthorities.Rexel DistributionIn 2008, the company was subject to a tax audit for thefinancial years 2005 and 2006. In December, the taxauthorities notified a proposed rectification arguing that theprice of Rexel Inc. (United States), transferred in 2005 byRexel Distribution to its Luxembourg subsidiary Mexel, waspriced €346 million below its market price. This would resultin a €119 million tax liability plus late payment interest. Thisallegation seems totally groundless to the company, which,consequently, challenges it.Manudax BelgiumManudax Belgium N.V., one of Hagemeyer’s Belgiansubsidiaries, entered into voluntary liquidation onNovember 27, 2000. During 1999 and 2000, ManudaxBelgium received assessments for VAT in connection withfraudulent transactions allegedly entered into by formeremployees during the period beginning late 1996 untilearly 1998. The amount of these assessments, includingpenalties and excluding interest, is €78.2 million. Theinterest accrued until December 31, 2007 amounts to€52.1 million. All assessments are being contested byManudax Belgium.The time allowed for appeal in respect of Manudax’sshareholder has been exceeded. Thus, the disputedamounts are those available within Manudax, currentlyunder liquidation. Therefore the Rexel Group believes thatthe outcome of this dispute should not have any impact onthe financial statements of the Rexel Group.14.6.2 Asbestos litigationThe Rexel Group is party to several asbestos-relatedproceedings. The principal proceedings are set out below.Although the Rexel Group believes that its exposure tohaving to pay significant amounts in connection with theseproceedings is limited and that these lawsuits cannot have,individually or in the aggregate, a material adverse effecton its financial condition or results of operations, the RexelGroup cannot give any assurances to this effect, nor can itpredict with certainty what the outcome of these lawsuitswill be. The amounts Rexel North America Inc. and Rexel,Inc. may pay, as the case may be, are difficult to quantify.Rexel North America, Inc. (Canada)In September 2000, Rexel North America, Inc., the RexelGroup’s Canadian subsidiary, acquired Westburne, Inc.,a company operating primarily in Canada and the UnitedStates. In 2001, Rexel North America, Inc. sold the non-coreportion of the Westburne, Inc. group’s business to a thirdparty. The assets related to the business of distribution ofelectrical products in the United States held by WestburneSupply, Inc., the U.S. subsidiary of Westburne, Inc., as wellas the shares of certain subsidiaries of Westburne, Inc., atthe time, were transferred to Rexel, Inc. as well as to certainof its subsidiaries.In the context of the disposal of the non-electricalbusinesses of Westburne, Inc., Rexel North America, Inc.(Canada) provided the purchaser with an indemnity relatingto product liability. This indemnity may be triggered withrespect to claims and proceedings relating to products soldprior to the date of the disposal of the non-core activities ofWestburne Inc. (July 1, 2001) commenced and notified toRexel North America Inc. prior to July 1, 2005.The Westburne, Inc. group companies that weredisposed of by Rexel North America, Inc., as well astheir predecessors (principally, the PE O’Hair company)and approximately one hundred third-party companiesthat are not related to the Rexel Group, were named asco-defendants in approximately 935 lawsuits filed since1992, mainly in California, on behalf of several thousandplaintiffs. The plaintiffs are claiming damages as a resultof alleged exposure to asbestos contained in productspurportedly distributed by the defendants, including thedisposed Westburne businesses, from 1950 to 1980. Theother co-defendants in these cases include manufacturers,contractors and other distributors.PAGE 234 | REXEL 2008