December 12, 2006
Via facsimile to ((713) 221-2112) and U.S. Mail
John R. Brantley, Esq.
Bracewell & Giuliani LLP
711 Louisiana Street, Suite 2300
Houston, TX 77043
Re: Seitel, Inc.
Preliminary Schedule 14A
Filed November 22, 2006
File No. 001-10165
Schedule 13E-3
Filed November 22, 2006
File No. 005-37899
Dear Mr. Brantley:
We have reviewed the above filings and have the following
comments. Where indicated, we think you should revise your
documents
in response to these comments. If you disagree, we will consider
your explanation as to why our comment is inapplicable or a
revision
is unnecessary. Please be as detailed as necessary in your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Schedule 13E-3
1. We note that Robert Monson, William Restrepo and Kevin
Callaghan
may roll over their equity positions in the company into equity of
the acquiring entity. Please include each as a filing person in
the
Schedule 13E-3.
2. Each filing person must individually comply with the filing,
dissemination, disclosure and signature requirements of Schedule
13E-
3. Therefore, you will need to include all of the information
required by Schedule 13E-3 and its instructions for Mr. Monson,
Mr.
Restrepo and Mr. Callaghan, to the extent not already disclosed.
For
additional guidance, see Item 8 of Schedule 13E-3, Item 1014 of
Regulation M-A and Question and Answer No. 5 of Exchange Act
Release
No. 34-17719 (April 13, 1981). In this regard, the reasons for
the
transaction and the alternatives considered by these affiliates
may
be different than those of the company, and this fact should be
reflected in the disclosure. In addition, be sure that each of
Mr.
Monson, Mr. Restrepo and Mr. Callaghan signs the Schedule 13E-3 in
his individual capacity.
Introduction
3. We note your disclosure that the filing persons disclaim any
obligation to file the Schedule 13E-3 and that those filing
persons
are not admitting they are affiliates of Seitel within the meaning
of
Rule 13e-3. We note similar statements in this Schedule and in
the
proxy statement that (i) Parent, Acquisition Co. and the ValueAct
entities "may" be deemed affiliates of Seitel, and (ii) Parent,
Acquisition Co., ValueAct Capital, and the Rollover Investors
"may"
be deemed to be engaged in a going private transaction. Please
tell
us why you need to express doubt as to these matters. We note
that
given your determination to file the Schedule 13E-3, the filing
persons may not disclaim their obligation to file the Schedule or
their affiliate status with respect to Seitel, and should not
express
doubt about the applicability of Rule 13e-3 to the present
transaction. Please revise.
Preliminary Schedule 14A
General
4. Please revise the cover page of your proxy statement and the
form
of proxy to clearly identify it as being preliminary. See Rule
14a-
6(e)(1) of Regulation 14A.
5. Please fill in the blanks in the proxy statement.
Summary Term Sheet
6. Please consolidate the disclosure in this Summary Term Sheet
and
the Questions and Answers section to avoid duplication of the same
information. In particular, we suggest you limit the Questions
and
Answers section to procedural matters relating to the meeting.
7. We note your disclosure here and elsewhere in the proxy
statement
that the board of directors determined that the merger is fair to,
advisable and in the best interests of our stockholders (other
than
ValueAct Capital and its affiliates and the Rollover Investors.
Please revise here and throughout the filing to more clearly and
consistently articulate whether the going private transaction is
substantively and procedurally fair to unaffiliated security
holders.
See Item 1014(a) of Regulation M-A.
8. Please update your disclosure regarding the HSR waiting period
and
the amendment of the Indenture.
Special Factors, page 17
9. The information required by Items 7, 8 and 9 of Schedule 13E-3
must appear in a "Special Factors" section at the beginning of the
proxy statement, immediately following the Summary section. See
Rule
13e-3(e)(1)(ii). Please revise the proxy statement to relocate
the
Special Factors section immediately after the summary information.
Background of the Merger, page 17
10. We note on page 19 that the increase in the company`s stock
price
from March to May 2006 was attributed in part to Schlumberger`s
acquisition of WesternGeco. Please explain the significance of
this
announcement for Seitel.
Recommendation of the Special Committee and the Board of
Directors,
page 26
11. We note that the special committee viewed the consideration as
fair in light of the company`s business, operations, financial
condition, etc. (page 28). Please revise to describe what
specifically about these aspects of the company were considered in
determining that the merger consideration is fair. Please apply
this
comment to the disclosure entitled "Position of the ValueAct
Capital
Filers Regarding Fairness of the Merger" on page 34.
12. Please describe briefly the "non-recurring events" in Seitel`s
industry that affected Seitel`s recent market prices (page 28).
13. Please describe briefly the provisions of Section 203 of the
Delaware general Corporation Law.
14. We note that the special committee received Blair`s fairness
opinion and that the board "considered" the special committee`s
conclusions regarding the fairness of the transaction and Blair`s
fairness opinion. Note that if any filing person has based its
fairness determination on the analysis of factors undertaken by
others, such person must expressly adopt this analysis and
discussion
as their own in order to satisfy the disclosure obligation. See
Question 20 of Exchange Act Release No. 34-17719 (April 13, 1981).
Please revise accordingly and apply this comment to the fairness
determination disclosure of the Rollover Investors.
15. Please disclose whether the special committee, the board of
directors and the Rollover Investors considered such factors as
net
book value, going concern value and liquidation value, according
to
Instruction 2 to Item 1014 of Regulation M-A. If any of these
factors was disregarded or not considered despite being material,
please discuss the reasons why those factors were disregarded or
not
considered. If you relied on the analysis of any of these factors
by
Blair, revise your disclosure to state that you adopt Blair`s
discussion of those factors.
16. See our comment above. Please also address how any filing
person
relying on the Blair opinion was able to reach the fairness
determination as to unaffiliated security holders given that the
Blair fairness opinion addressed fairness with respect to security
holders other than the ValueAct Capital and its affiliates, rather
than all security holders unaffiliated with the company.
Position of the ValueAct Capital Filers Regarding Fairness of the
Merger, page 34
17. Refer to the last paragraph of this section. Please revise
your
disclosure to state definitively whether the foregoing discussion
includes all material factors considered by these filing persons
or
not.
Opinion of Financial Advisor, page 35
18. Refer to the disclaimer at the top of page 36. Clarify
whether
Blair has given its consent to include this disclosure and its
opinion as part of the proxy statement.
19. Please revise to disclose the data underlying the results
described in this section and to show how that information
resulted
in the multiples/values disclosed. For example, disclose (i) the
enterprise values, revenue and EBITDA information for each
comparable
company that is the basis for the multiples disclosed on page 38
with
respect to the Selected Public Companies Analysis, (ii) the
transaction date and data from each transaction that resulted in
the
multiples disclosed on page 39 with respect to the Selected M&A
Transactions Analysis, and (iii) the company`s projected results
that
were used in conducting the Discounted Cash Flows Analysis, the
Leveraged Acquisition Analysis and the Accretion/Dilution Analysis
or
a cross-reference to a place where those projections appear in the
proxy statement.
20. Refer to the Discounted Cash Flow Analysis. Please explain
how
Blair determined that discount rates of 14%-16% and Cash EBITDA
multiples of 6.0x-7.0x were the most appropriate indicators of
value.
Disclose the industry averages.
21. Please explain the significance of the Leveraged Acquisition
Analysis and its results in connection with Blair`s ultimate
fairness
determination. Please apply this comment also to the results
obtained in the Premiums Paid and the Take Private Premiums Paid
analyses.
22. Please explain why Blair did not use the Business Cyclicality
Case projections for the Accretion/Dilution Analysis.
23. Please provide the disclosure required by Item 1015(b)(4) of
Regulation M-A. Alternatively confirm supplementally that no such
relationship existed.
The Merger Agreement - Conditions to Completion of the Merger,
page
81
24. We note the conditions relating to the demand of appraisal
rights, the receipt of financing by the acquiring entities and the
amendment or termination of the Indenture. We note additionally
that
these conditions may be waived by the company or the acquisition
entities, as the case may be. Please advise the steps the company
is
taking in the event that these conditions are not satisfied or are
waived. For instance, should the conditions be waived, would the
company re-solicit security holders?
Financing for the Merger, page 54
25. Refer to the penultimate bullet point on page 55. Please
disclose whether any event having a material adverse effect on the
company has occurred between December 31, 2005 and the date of the
proxy statement. Also, please disclose whether the measures
described in the ninth bullet point on page 57 are currently met.
Selected Historical Consolidated Financial Data, page 91
26. We note that you have incorporated by reference the financial
statements for the year ended December 31, 2005 and for the
quarters
ended September 30, 2005 and 2006 and that you included in the
document disseminated to investors the summary financial
statements
required by Item 1010(c) of Regulation M-A. Please revise your
disclosure to provide the book value as of the date of your most
recent balance sheet, as required by Item 1010(c)(5) of Regulation
M-
A.
27. The pro forma data set forth in paragraphs (b) and (c)(6) of
Item
1010 is also required. Please provide it or tell us your basis
for
not doing so.
Where You Can Find More Information, page 96
28. Refer to the fourth paragraph in this section. Note that
Schedule 14A does not specifically permit general "forward
incorporation" of documents to be filed in the future. Rather,
you
must specifically amend your document to specifically list any
such
filings. Please revise.
* * * *
As appropriate, please amend your filings in response to
these
comments. You may wish to provide us with marked copies of the
amended filings to expedite our review. Please furnish a cover
letter with your amended filing that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amended filings and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all material information to
investors. Since the company and its management are in possession
of
all facts relating to a company`s disclosure, they are responsible
for the accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company (and any additional
filing
persons you add on the Schedule 13E-3 in response to our comments
above) acknowledging that:
* the filing person is responsible for the adequacy and accuracy
of
the disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the filing person may not assert staff comments as a defense in
any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
Please direct any questions relating to the going private
transaction filings to me at (202) 551-3619. You may also contact
me
via facsimile at (202) 772-9203. Please send all correspondence
to
us at the following ZIP code: 20549-3628.
Sincerely,
Daniel F. Duchovny
Special Counsel
Office of Mergers & Acquisitions
John R. Brantley, Esq.
Bracewell & Giuliani LLP
December 12, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-3628
DIVISION OF
CORPORATION FINANCE