1109018 Informal Interpretation

Michael Verne

– Agree that B is not an entity.  K Walsh concurs


From: (Redacted)
Sent:Monday, September 19, 2011 11:06 PM
To:Verne, B. Michael

Subject: Questions re: Sec. 801.1(a)(2) and HSR Analysis
related to a Proposed Transaction


Werepresent Entity A, which, through its wholly-owned indirect subsidiary, EntityB, intends to acquire an approximate 17% interest in a corporation and 17% of arelated LLC, for a total consideration exceeding the currentsize-of-transaction threshold. Entity A is wholly-owned by a foreign province(the "Province"), and was established per its enabling statute forthe purpose of managing the funds of its depositors, the Province and itspublic bodies (and their pension funds), and at the same time contributing tothe Province's economic development. For the reasons stated below, we believethat for purposes of 16 C.F.R. Sec 801.1(a)(2), which states that "theterm entity shall not include any foreign state, foreign government, or agencythereof (other than a corporation or unincorporated entity engaged incommerce)," Entity A is an "agency" of the Province, andtherefore, not an "entity" subject to the HSR Act.

EntityB is a to-be-formed Delaware LP. We would appreciate your assistance indetermining whether Entity B also qualifies as an "agency" of theProvince, and therefore would not be considered an "entity" subjectto the HSR Act. We understand that prior to August 18, 2011, non-corporateentities wholly-owned by an agency of a foreign government would not have beensubject to the HSR Act (See Informal Staff Opinions #0412011 and #0604003) butthat under the current Rule 801.1(a)(2), this is no longer the case.


Thefollowing facts are applicable to Entity A:

(1)Entity A was formed under specific legislation

(2)Most of its Board of Directors are appointed by and can be removed by theProvince, with the President and CEO chosen by the rest of the board membersand approved by the Province

(3)Entity A is chartered for the purposes of "receiving monies on deposit asprovided by law and managing them with a view to achieving optimal return oncapital within the framework of depositors' investment policies while at thesame time contributing to [the Province's] economic development"

(4)Entity A sets the investment policy for its portfolios and assists itsdepositors with respect to their allocation between the portfolios

(5)The power to dissolve Entity A resides with the Province

(6)The property belonging to Entity A is the property of the Province, but EntityA may use the property as security or encumber it as though it were not theproperty of the Province

(7)Members of the Board, and officers and employees of Entity A cannot be sued forany official act performed in good faith in the exercise of their functions

Basedon the above, and in conjunction with our review of Informal Staff Opinion#1103006 and Interpretation 11, ABA Premerger Notification Practice Manual (4thed. 2007)("Premerger Manual"), we believe Entity A is an"agency" of the State, and therefore, is not an "entity"subject to the HSR Act. Please confirm whether you agree with this analysis.


Thefollowing facts are applicable to Entity B:

(1)Entity A's enabling legislation states that all wholly-owned subsidiaries aremandataries of the Province and the provisions of Entity A's enablinglegislation are applicable to its wholly-owned subsidiaries

(2) Entity B's purpose is to serve as a vehicle tohold investment interests separate from the Province

(3)The Board of Directors (or equivalent) and Chief Executive will be appointed byEntity A and will report to Entity

(4)Neither the Province nor Entity A will have the right to approve of Entity B'sregulations, investment plans or budgets

(5)Entity A will hold the right to dissolution of Entity B

(6)Any ownership rights of any property held will ultimately reside with Entity A

(7)Entity B's officers and employees cannot be sued for any official act performedin good faith in the exercise of their functions

Basedon the above facts, would Entity B qualify as an "agency" of theProvince, and therefore be exempt from the HSR Act because it is not an"entity?

Additionally,if the acquisition to be made by Entity B is reportable under the HSR Act,based on our review of Informal Staff Opinion 111103006, Interpretation 11,Premerger Manual, and Interpretation 32, Premerger Manual, we believe noinformation would be required from Entity A (assuming it is an"agency" of the State) or any of Entity A's other controlledholdings, provided those holdings are not commonly controlled by Entity B's(holding company) parent, which is itself a wholly-owned subsidiary of EntityA. Can you please confirm that this is correct?

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