Question
From: (redacted)
Sent: Thursday, June 30, 2005 2:34 PM
To: Verne, B. Michael
Subject: HSR question
Mike,
Asmentioned in my prior e-mail, an unrelated HSR question has crossed my desk that I wouldappreciate some input on.
Wehave a transaction where the principal shareholders of the acquired person aretwo brothers (Person A and Person B) and a Trust. Person A, Person B and theTrust each have approximately 1/3 interest in the acquired person. The Trust,in turn, is revocable and has three grantors/beneficiaries: Person A, Person Band the sister of Persons A and B. The trust agreement does not specificallyindicate what interests each of the grantors has in the Trust, but income ofthe Trust is to be paid in equal amounts to the grantors, suggesting that eachhas 1/3 interest in the Trust. Person A serves as trustee for the Trust, andneither the grantors nor anyone else has the ability to control the actions ofthe trustee. The Trust is revocable upon written agreement of the threegrantors.
Sincethe Trust is revocable, 801.1(c)(4) should apply, meaning that the holdings ofthe Trust are the holdings of the three grantors/beneficiaries (such interestsbeing held, presumably, on a 1/3 basis for each grantor). Thus, each of PersonA and Person B would control 4/9 of the acquired person (1/3 individualinterest plus 1/9 interest by virtue of their interests in the Trust).Consequently, there would not appear to be a single entity that holds 50% ormore of the voting securities of the acquired person, thereby making theacquired person its own UPE.
Practicallyspeaking, Person A can direct the business activities of the acquired personthrough his 1/3 individual interest, along with his position as trustee for theTrust, which also has 1/3 interest in the acquired person. However, becausePerson A has only 1/3 interest in the Trust (and therefore an additional 1/9interest in the acquired person), his collective holdings would not constitute50% or more of the voting securities of the acquired person. Is this analysissound?
If there is additional relevant information thatI need to provide, please let me know.