1203005 Informal Interpretation

Michael Verne

  – PE1 and PE2 are not associates.  K Walsh concurs.





Wednesday, March 14, 2012 12:22 PM


Verne, B. Michael




Associate Entity Question 801.1(d)(2)


Acquiring Party Structure 2.pdf




I am representing theacquiring party in a transaction that will require an HSR filing and am tryingto understand

whether or not certainentities qualify as associates under the new regulations. For your convenience,I have attached a structure chart outlining the structure of the acquiringparty.

I understand that it isunlikely a corporation will have associate entities as the board of directorsof the corporation typically has the sale right to manage the operations andinvestment decisions of the corporation. (See Decision Tree for IdentifyingAssociates, available at: http://www.ftc.gov/bc/hsr/decision-tree.pdf). In this particular scenario, the two largest shareholders, PE 1(Partnership) and PE2 (Partnership) (collectively, the "Private EquityFunds") have approximately 45% and 30% of the voting securities of the UPEand are unrelated private equity funds. These Private Equity Funds are alsoboth the "Managing Members" of LLC 1 that is the "ManagingMember" of Partnership A that holds approximately 25% of the votingsecurities of the UPE.

We have confirmed that thePartnership A is not controlled (for purposes of the HSR Act) by either of thePrivate Equity Funds. We have also confirmed that the Private Equity Funds arenot able to appoint a majority of the board of directors of the UPE. Thus, weare confident that we have the correct UPE. We were not sure, however, whetherthe Private Equity Funds (and those entities above the Private Equity Funds)could be considered associate entities given that the Private Equity Funds arethe managing members of Partnership A, which has 25% of the voting securitiesof the UPE.

Given that the UPE has aboard of directors and is not controlled (or managed) by any entity, we did notthink the private equity funds would qualify as associate entities, but wantedto check with you given the fact pattern. We are happy to provide additionalinformation as needed.

Thanks in advance for yourconsideration of this issue.

[referto image file for diagram]

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