1104001 Informal Interpretation

Michael Verne

Company A would file as both an acquiring and acquired person as it looks
going into the transaction, so it would not include information on Company B.





Thursday, April 07, 2011 1:27 PM


Verne, B. Michael

Subject: HSR Hypothetical


Person A holds all of the Class 2securities of Company A. Those Class 2 securities give him the right to appoint70 percent of the board of directors of Company A. No other entity holds 50percent or more of Company A's voting securities. Company A has a marketcapitalization of $60 million. Company B has a market capitalization of $300million. Company A enters into an agreement with Company B. Under the terms ofthe agreement, Company A will form a special acquisition subsidiary into whichCompany B will merge. Company B will become a wholly owned subsidiary ofCompany A. The shareholders of Company B will receive 75 percent of the votingsecurities of the Company A. The former shareholders of Company A will receive25 percent of the voting securities of Company A. As a result of thetransaction, Company A will be its own ultimate parent entity.

It would appear that the"acquisition" of Company B by Company A is a reportable transactionas well as any acquisitions of the voting securities in Company A by theshareholders of Company B that otherwise meet the HSR thresholds. Person A'sholding of shares in Company A, which is reduced as a result of thetransaction, is not reportable.

The substance of the transaction appearsto be Company B acquires Company A, but since Company B is its own ultimateparent, and Company A will control Company B as a result of the transaction, itwould appear that Company B should *not* file as an acquiring person. (IfCompany B were the acquiring person, the transaction would likely not bereportable because the value of transaction would likely be below $66 million.)The shareholders of Company B would file as acquiring persons of the newCompany A, who's filing would have to reflect the addition of Company B. Inthat instance, is it permissible to refer to the data that's in the possession,custody or control of Company B as being unavailable to Company A, but in thefiling provided by Company B?

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