1112001 Informal Interpretation

15 USC 18a(c)(4), 801.15
Michael Verne

- (Redacted) -aggregation would be required because as you noted 801.15(a) does not include 7A(c)(4), however, you said that Fund B held more than 50% of Corp B at one point. If Fund B filed for and crossed the 50% threshold at some point during the year following ET, it can rely on 802.21 to acquire any amount of additional shares. Here is the relevant discussion: Acquisitions exempt under section 7A(c)(4) because they involve transfers to or from a Federal agency or from a State or political subdivision are deemed held for purposes of later acquisitions. If the later acquisition involves the transfer of assets of, or voting securities issued by, a Government agency, it will also be exempt. On the other hand, if a Government agency were to make an exempt transfer of voting securities of a nongovernmental issuer, and if the acquiring person were later to purchase additional voting securities of the same Issuer, all the holdings of that issuer's voting securities by the acquiring person must be aggregated by the acquiring person to determine its holdings. This aggregation is appropriate because the fact that voting securities were acquired from a governmental entity does not affect the possible use of such securities by the acquiring person to influence or control the issuer.


From: (Redacted)
Sent: Monday, December 05, 2011 12:29 PM
To: Verne, B. Michael
Cc: (Redacted)
Subject: Question Regarding Revised 801.1(a)(2)

Hi, Mike-

I have a question concerninga follow-on acquisition related to the proposed transaction that you discussedwith (Redacted) in the attached email exchange. Appropriate HSR filingswere made for the transaction (the structure of the transaction changedslightly, as described below) and the HSR waiting period was terminated early.My current question relates to the recent changes to 801.1 (a)(2) and whetherFund B's current holdings of voting stock in Corporation B must be aggregatedwith the value of any additional voting stock in Corporation B that Fund B mayacquire in the future.

Subsequent to thetermination of the HSR waiting period for the transaction you discussed withSandy, Corporation A (which was controlled by Fund A as set forth below) wasmerged into a newly created wholly owned subsidiary of Corporation B (which wascontrolled by Fund B as set forth below), with Corporation A surviving as awholly owned subsidiary of Corporation B. Fund A and other Corporation Ashareholders received cash and voting securities in Corporation B in exchangefor their shares in Corporation A. Post-transaction, Corporation B became itsown UPE with Fund A and Fund B each holding approximately 40% of CorporationB's outstanding voting securities and other third parties holding the remainingCorporation B voting securities.'

We understand that Fund Bnow is considered an "entity" under revised rule 801.1(a)(2), sinceit is a "non-corporate entity engaged in commerce" that is not itselfan agency of the government, although it is controlled by a state agency. FundB may acquire additional voting securities of Corporation B in the future. FundB currently holds voting securities of Corporation B, the initial acquisitionof which was exempt pursuant to 7A(c)(4) and old 801.1(a)(2). Suppose that FundB's current holdings of Corporation B voting securities, if aggregated withCorporation B voting securities that Fund B intends to acquire, will result inFund B holding voting securities of Corporation B valued in excess of $66million (or the adjusted threshold then in effect). Assume that such a proposedacquisition will increase Fund B's per centum share of Corporation Boutstanding voting securities. As stated above, Fund B currently holds lessthan 50% of the outstanding voting securities of Corporation B.

Is Fund B required tomake an HSR filing in connection with such an acquisition of Corporation Bvoting stock? Although 7A(c)(4) is not one of the exemptions explicitly listedin 801.15(a), it seems counter-productive to require aggregation and,potentially, an HSR filing when the initial acquisition of the Corporation Bvoting stock currently held by Fund B was exempt. The state agency and Fund Bhave not changed, and Fund B even controlled Corporation B at one point becauseit held 50% or more of Corporation B's outstanding voting stock. While weunderstand that the rationale for the change to 801.1(a)(2) was to createuniformity in the treatment of corporate and non-corporate entities controlledby state agencies, by not also amending 801.15, the change could impose an HSRfiling requirement based on a past acquisition that was not reportable underthe prior version of the regulation. Thus, an interpretation that does notexpand the scope of HSR to trigger a filing based on a previouslynon-reportable transaction seems warranted on these facts.

'You advised that themain transaction was not exempt under either 7A(c)(4) or 802.30(a). Since FundA and Fund B were (and are currently) non-corporate entities controlled by astate agency, however, they were not considered "entities" forpurposes of old 801.1(a)(2) and thus, Corporation B reported as the acquiringperson and Corporation A reported as the acquired person. The acquisition ofCorporation B shares by Fund A was exempt under 7A(c)(4) and old 801.1(a)(2).The acquisition of Corporation B shares by the other Corporation A shareholdersdid not meet the HSR size-of-transaction threshold.

As always, many thanksfor your guidance. Please let me know if you have any questions or would liketo discuss the transaction described above.

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