Question
From:
(Redacted)
Sent:
Thursday, November 04, 2010 11:26 AM
To:
Verne, B. Michael
Subject: HSR question
Mike,
I have a transaction where 5 separateentities are being purchased by a single acquiring person. The entities haveoverlapping shareholders (although the overlap is not 100%), and in eachinstance one of the shareholders is a revocable trust that has 3 grantors (Iwill refer to them herein as A, B and C). Under 801.1(c)(4), A, Band C wouldpresumably be deemed to hold the voting securities and assets of the trust.
In the typical case, the trust holds35%-40% of the acquired entities' shares, with individuals A and B each holdingan additional 15%-30% of the shares, but not necessarily in equal amounts. As Iread the HSR rules, it would seem that A and B would be the UPEs of eachacquired entity based on their 15%-30% direct shareholdings and the 35%-40% shareholdingof the trust that A and B (and C) are deemed to hold under 801.1(c)(4). Theresult in some cases is that A and B will be deemed to each hold greater than50% of an entity. This result strikes me as somewhat bizarre, thus my requestfor confirmation that I am interpreting the rules correctly.
To conclude the analysis, the votingsecurities of each acquired entity would be valued at less than $20 million,yet 801.14 would presumably require us to aggregate the value of those votingsecurities since they are being acquired from common UPEs (A and B). One entityis a foreign issuer without U.S. assets or sales (thus 802.51 should apply toexclude it from the valuation determination), but the other entities do notappear to come within any exemption.