1203003 Informal Interpretation

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Michael Verne






Wednesday, March 14, 2012 2:43 PM


Verne, B. Michael


Rights and Obligations of Spun Off Entity

Mike, I would appreciateyour thoughts on the following factual scenario regarding a spun-off entitythat has become its own UPE:

FACTS: Company A has madean HSR filing and during the waiting period crossed an HSR threshold;thereafter, Company A spun off a set of divisions into newly formed Company B;both Company A and Company B are now their own UPE's; at the time of thespin-off Company B also received a minority share of the voting stock of athird person ("Company X") for which Company A originally filed anHSR premerger notification. Less than five years have passed since the originalfiling by Company A who could have taken advantage of the exemption found insection 802.21 if it wanted to purchase additional Company X stock up to thenext threshold. Company B, now the holder of the minority interest in Company Xwishes to acquire additional voting stock of Company X up to that threshold.


Does Company B whoreceived the Company X stock at the time of its creation have the samerights/obligations under section 802.21 of the HSR rules as Company A, theoriginal filing person? In other words, may Company B acquire Company X votingstock without a new HSR notification, up to the next HSR threshold that was notcrossed by Company A, before the original five year time period has expired?


When Company A filed toacquire the voting stock of Company X the assets of what became Company B werewithin Company A; thus, the governmental agencies were apprised of the relevantfacts and could review them from an anti-trust basis; if Company A was allowedto acquire the voting stock of Company X based upon governmental review, thesame review in effect (but to a lesser extent) would now apply to Company B. Thisin effect duplicates the Company AlCompany X review if Company B is required tofile for a proposed acquisition of additional Company X voting stock that doesnot cross a new HSR threshold. In this regard, opinion number 242 of the fourthedition of the Premerger Notification and Practice Manual, addressing the issuewhen must parties to a transaction refile, notes, in part, that "Refilingis required if the ultimate parent entity of any acquiring person changes,unless the new ultimate parent entity was within the original ultimate parententity." (example 3 of this opinion).


Because Company B was ineffect part of Company A at the time of the original HSR filing by Company A,Company B's proposed acquisition of Company X voting stock would come withinthe exemption discussed in example 3 of opinion number 242. This is onlylogical because the anti-trust review has already occurred at the time of theoriginal filing; thus, Company B has the same rights under section 802.21 toacquire Company X voting stock during the five year period originally grantedto Company A based upon its acquisition of Company X voting stock during theone year period following expiration of the original HSR waiting period.

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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