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Securities Exchange Act of 1934 Rule 14d-11; Rule 14d-11(f) Rule 14d-10(a)(2) Rule 14e-1(b) - page 5 / 13





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We arc writing to request that the staff (the "Staff')of the Division of Corporation Finance of the Coininission (the "Divjsion of Coi-porationFinance") grant to the Rayer Entities the exeinptive and no action relief froin the provisions of Rules 14d-1O(a)(2),

14d-11, 14d-11(f)and 14e-1(b) proinulgated under the Securities Exchange Act of 1934, as

anlended (the "&change

Act") described below.


On July 31, 2006, the Offeror and Scheriilg entered illto a doinination and profit and loss transler agreement (the "Doinination Agreement"). As provided by Gei~nan corporate law, thc Domination Agreement provides that the nlanageinent of Schering must follow the instructions of the Offeror in all respects relating to the managen~enof Schering. All profits of Schering (other than those required to be added to statutory reserves) are transferred to the Olferor, and the Offeror inust provide ainounts to Schering to ensure Schering does not show a loss in its incoine statement.

Pursuant to the Gernlan Stock Corporation Act (Aktiengesetz, the "Stock Corporation Act"), the effectiveness of the Doinination Agreeinent requires both the consent of the shareholders of Schering, which the Rayer Entities and Schering obtained at an extraordinary shareholders' ineetiilg of Schering held on Septenlber 13,2006, and of Rayer in its capacity as sole sl~arel~oldof the Olferor, and the subsequent registration of the Doininatioil Agreenlent in the Conlinercia1 Register (Handelsregister) of the Local Court (Amtsgericht) in Charlottenburg, Berlin, which is where the registered corporate office of Schcring is located. The Doinination Agreeinent will bcconle legally effective on the day of such registration (the "Effective Date").

Pulrsuant to the Stock Corporation Act, as a meails of protecting the interests of the shareholders of Schering other tl~a the Rayer Entities, the Doinination Agreeinelit nlust provide for (i) adequate coinpensation for unaffiliated shareholders by ineans of recurring payinents in proportion to their share in the share capital (coinpensation payments), colloqrlially rcferred to as a guaranteed dividend (the " m a n t e e d Dividend") and (ii) an undei-taking of the Offeror to purchase, during a certain period of time and at the request of any rlilaffiliated shareholder of Schering, its Shares for an adequate cash coinpensation (the "Put Price") provided for in the Doinination Agreenlent (the "Put Rights"). The Bayer Entities and Schering engaged, on a joint basis, KPMG Deutsche Treuhand-Gesellscl~aft ("KPMG") as an independent expert to assist in deternlining the adequate anlount of the Guaranteed Dividend and the Put Price to be paid. Pursuant to the Stock Corporation Act, the Doinination Agreement, including the ainount of the Put Price, is subject to exainination by one or inore court appointed qualified auditors. These court appointed auditors are required to issue a written report stating their findings.

Under applicable Gerinan law, the ainouilt payable by the Offeror to any unaffiliated shareholdcr exercising its Put Right with respect to its Shares on ally date is equal to the Put Price provided for in the Doininatioil Agreenlent plus acciued interest thcreon from but excluding the Effcctive Date of the Doinination Agreement at a statutory interest rate (the "Statutory Interest"), which Statutory Interest is reduced by any Guaranteed Dividend payinents that have been paid.


The initial offering period will coillnlence on the date (the "Commencen~ei~t on which the Offeror has published the meails to exercise the Put Rights, wl~ic will

proinptly follow the datc (the "&gistration Announceinent Date") on which the registration

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