1201007 Informal Interpretation

Date:
Rule:
801.1(c), 802.21
Staff:
Michael Verne
Response/Comments:

  1.      The current position is that receiving an annuity from a GRAT or CRT does not constitute a reversionary interest and therefore the settlor does not hold the assets in the trust. 2.      You would not be able to acquire additional shares above the $100 million threshold under 802.21, because meeting or exceeding the threshold has to be by means of an acquisition, not an increase in value of previously acquired shares. The key language is in 802.21 (a)(3): The acquisition will not increase the holdings of the acquiring person to meet or exceed a notification threshold (as adjusted) greater than the greatest notification threshold met or exceeded in the earlier acquisition. In your transaction, the $50 million threshold was the only one exceeded in the earlier acquisition.

Question

From:

(Redacted)

Sent:

Friday, January 13, 2012 3:02 AM

To:

Verne, B. Michael

Subject:

2 Questions: 801.1(c)(4) and 802.21

Mike,

Canyou help me with two questions?

1. I've seen several arguably conflictinginformal opinions (e.g., compare 1106005, 0510004, 0505006, 0304003 with0304004, 9402011) on the question whether a settlor's receipt of an annuityfrom a GRAT or a charitable remainder trust constitutes a reversionary interestunder 801.1(c)(4) (such that the settlor holds the assets in the trust) if theannuity may be paid, or is even nearly certain to be paid, in part out of thecorpus of the trust (because the annuity payment exceeds the trust's income).It appears from informal opinion 0702013 (http://www.ftc.gov/bc/hsr/informal/opinions/0702013.htm) that the most recent answer directly on point is "no" (such thatthe settlor does not hold the assets in the trust). Is that the current PNOposition?

2. Hypothetical: Buyer files for anacquisition of voting securities (well under 50%) of publicly-traded X Corp atthe $100 million (as adjusted) threshold. The waiting period expires, and Buyeracquires voting securities valued in excess of the $50 million threshold butnot exceeding the $100 million threshold. X Corp's share price then increasessuch that within the 1-year period following expiration of the waiting period,the value of Buyer's shares exceeds the $100 million threshold (although Buyerdid not acquire any additional shares). Does the increase in value of Buyer'sholdings above the higher threshold during the 1-year period satisfy the 802.21exemption such that Buyer can acquire more voting securities valued up to the$500 million threshold for 5 years from the waiting period expiration withoutmaking a HSR notification?

Thisseems consistent with the language of 803.7, which requires the acquiring person's"holdings" to meet or exceed, within 1 year, the notificationthreshold with respect to which the notification was filed. The PNO addressed asomewhat similar (but not directly on point) question in Opinion #204 of thePremerger Manual (and the associated informal opinion 8302004).

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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