1202014 Informal Interpretation

Sheila Clark-Coleman

  – Agree. MV concurs.

UPDATE May 4, 2016:   This no longer represents the position of the PNO.



From: (Redacted)
Sent: Friday, February 24, 20126:51PM
To: Clark-Coleman, Sheila
Cc: (Redacted)
Subject: Investment purpose

Dear Sheila,

Thanks again very muchfor making time this afternoon to speak with us.

To summarize ourdiscussion, we were calling with a question under the investment-onlyexemption, to confirm our understanding of the Premerger Notification Office'sview with respect to prior informal interpretations and from discussions someof our colleagues had with you about a year ago with respect to a similartransaction. The key question is to confirm that the 802.9 exemption isavailable when the parties are not competitors within the US even if they maycompete outside the US. There are several informal interpretations that relateto this question. The most directly on-point is Int. 0705006 (May 9, 2007).

That interpretation notesthat the PNO takes the view that being a competitor creates a rebuttablepresumption that the securities are not held solely for purposes of investment.However, it also confirmed that the exemption is available where there is no impacton US competition (the companies are not competitors within the US) and theother indicia that are inconsistent with the investment purpose are notpresent.

We have a case that is verysimilar to those described in the informal interpretation and in thediscussion a year ago. In our most recent discussion on this topic, mycolleagues described the acquisition of a 3-5% interest in a US public companyby a non-US company. No board seat or observer rights were sought. There was nointent to influence or exert control over the target. The companies did havejoint ventures together outside the United States. The companies also were bothin the same business, and did compete outside the US. However, the acquiror hadno US business and no US sales. In that case, you confirmed that the 802.9exemption would be available.

The current transactionis similar, although it involves the acquisition of a stake in a non-UScompany. In this case, the interest to be acquired will be approximately 7%.Both companies are in the same business and compete in Europe for example.However, the target stopped exporting the competitive product to the US in theearly 1990s and has no intention to restart sales in the US. Currently, underapplicable US regulation, the target's products may not be imported into theUS. The target does sell other products, some of which are inputs into thefinal competitive product. In fact, the target may and probably does sellcomponents to the acquiror in a vendor/vendee relationship. (See Int. 0103013(Mar. 25, 2001) (vendor-vendee relationship does not preclude use of 802.9)).However, the acquiror is not in the business of selling any competingcomponents to third parties in the US.

None of the other"disqualifiers" of 802.9 is present. The acquiror will not have aboard seat or observer rights, will not propose corporate action or solicitproxies and has no intention to acquire control. There are no common directorsor officers. proposing corporate action, no interlocking directors/officers.

As was the case in theother transaction we discussed, the parties do intend at around the same timeto enter into a global alliance. The alliance contemplates the jointdevelopment of products for sale only outside the US. The parties alsocontemplate the creation of a corporate purchasing joint venture company, whichwill be subject to separate HSR analysis and will not implicate US competitionissues as there will remain no overlap in the US. (See also Int. 9501007 (Jan13, 1995) (co-ventures may qualify for 802.9)).

On this basis, we believethat the investment purpose exemption available under 802.9 will apply to thetransaction and no HSR notification will be required. Please let us know if youconcur, and do let us know if you have any additional questions.

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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