1301011 Informal Interpretation

Form Items 4(c) and 4(d)
Michael Verne

  Our take is that if the 4(c) and (d) documents that were created in connection with the old transaction are used by officers or directors to analyze the new transaction, they would be responsive. The analysis of attaching an old document to a new one comes into play with ordinary course documents that can become 4(c) by incorporating them as an exhibit to a new 4(c) document. We think that you are reading our advice on synergy documents too narrowly. What we meant was that if a document, for instance, made a statement that "the deal will result in synergies", without any other information, that document would not be responsive. However, if a document has substantive analysis of different categories of synergies,· even without attaching a dollar amount to them, we would consider it responsive.





Monday, January 14, 2013 11:15 AM


Verne, B. Michael


Questions on Items 4(c) and 4(d)


Ihope you're doing well. I write to ask a couple of questions about Items 4(c)and 4(d).

First,I have a question about the "clean break" rule. Assume that Buyer A andCompany B discussed a transaction four or five years ago (the "oldtransaction") where Buyer A was considering buying a business (the"Target Business") from Company B, but Company B then sold a 50%interest in the Target Business to Third-Party C, marking a clean break to theold transaction between A and B. Today, however, Company B and Third-Party C,both ultimate parents now for the Target Business, are selling the TargetBusiness to Buyer A (the "current transaction"). In the course of evaluatingthe current transaction, officers of Buyer A dust off and review andanalyze due diligence and other files from the old transaction, and these filesfrom the old transaction discuss Item 4(c) and 4(d)-related content. However,Buyer A's review of the old files is passive in that Buyer A does not attachthem as an exhibit to a new otherwise 4(c) or 4(d)responsive report analyzingthe current transaction.

Inthis situation, where Buyer A simply reviews or analyzes files from the oldtransaction, my understanding is that the old files are not 4(c) or4(d)-responsive for the current transaction. Rather, to be 4(c) or 4(d)responsive for the current transaction, Buyer A would have to attach them as anexhibit to a new report that analyzes the current transaction with regard to4(c) or 4(d) topics. Is my understanding correct?

Second,on Item 4(d)(iii), I would like to confirm the guidance from the FTC websitethat "If a document makes a reference to synergies with no quantifieddollar amount attached (e.g., the deal with result in synergies) this is notenough to make a document responsive to Item 4(d)(iii)."

Iread this guidance to mean that a document must actually state a specificdollar amount to be responsive to Item 4(d)(iii). Thus, if a document describesand analyzes various categories of synergies that could be expected to flowfrom a transaction --but the document does not quantify a dollar value of theseexpected synergies -then the document is not responsive to 4(d)(iii).

Similarly,if one document (Doc. #1) estimates that $50 million in synergies will flowfrom a merger, and Doc. #1 gives the assumptions that went into that estimate,then Doc. #1 is 4(d)(iii)-responsive. But if a separate document (Doc. #2) alsohappens to describe the synergies --without mentioning any dollar estimate--then Doc. #2 is not 4(d)(iii)-responsive, even if Doc. #2 gives a moredetailed description of the synergies than Doc. #1 gives.

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