– Do not include debt in acquisition price.
Sent: Monday, August 20, 2012 6:05 PM
To: Verne, B. Michael
Subject: Quick HSR question re role of assumed debt in acquisitions of votingsecurities
Ihope your summer is going well, and I have what I think is probably a familiarHSR question for you.
Werepresent a buyer who will be buying 100% of the voting securities of acorporation, which we'll call Target, Inc. The purchase price for the securitiesof Target, Inc., falls below the HSR filing threshold. Buyer will also beassuming debt on which Target, Inc., is one of two obligors. Buyer will assumea pro rata share of the debt and discharge the debt after the closing. If theassumed debt is added to the acquisition price of the voting securities, thenBuyer's total payments would exceed the HSR filing threshold, but if thevaluation analysis extends to the voting securities alone then the transactionwould fall below the filing threshold.
TheAxinn treatise suggests that assumed debt should not be included in determiningvaluation in an acquisition of voting securities, and therefore the abovetransaction would be non-reportable. My understanding is that the treatiseaccurately describes the approach followed by the PNO with respect toacquisitions of voting securities. However, to be certain I wanted to ask youto confirm my conclusion of non-reportability under the facts provided above.