Yes - only in the world of wacky HSR math can you have more than 100% of something. Your conclusions are correct: A and B are each deemed to hold 15%-30% and the trust's 35%40%, so each is an acquired person and the value of the voting securities of all of the entities (except the exempt foreign issuer) would be aggregated. C only holds the trust's 35%-40%, and so is not an acquired person.
Thursday, November 04, 2010 11:26 AM
Verne, B. Michael
Subject: HSR question
I have a transaction where 5 separate entities are being purchased by a single acquiring person. The entities have overlapping shareholders (although the overlap is not 100%), and in each instance one of the shareholders is a revocable trust that has 3 grantors (I will refer to them herein as A, B and C). Under 801.1(c)(4), A, Band C would presumably be deemed to hold the voting securities and assets of the trust.
In the typical case, the trust holds 35%-40% of the acquired entities' shares, with individuals A and B each holding an additional 15%-30% of the shares, but not necessarily in equal amounts. As I read the HSR rules, it would seem that A and B would be the UPEs of each acquired entity based on their 15%-30% direct shareholdings and the 35%-40% shareholding of the trust that A and B (and C) are deemed to hold under 801.1(c)(4). The result in some cases is that A and B will be deemed to each hold greater than 50% of an entity. This result strikes me as somewhat bizarre, thus my request for confirmation that I am interpreting the rules correctly.
To conclude the analysis, the voting securities of each acquired entity would be valued at less than $20 million, yet 801.14 would presumably require us to aggregate the value of those voting securities since they are being acquired from common UPEs (A and B). One entity is a foreign issuer without U.S. assets or sales (thus 802.51 should apply to exclude it from the valuation determination), but the other entities do not appear to come within any exemption.