Skip to main content
Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Do not include debt in acquisition price.

Question

From: (Redacted)
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

DearMike,

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.

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.

Learn more about Informal Interpretations.