Question
From:
(Redacted)
Sent:
Wednesday, March 14, 2012 2:43 PM
To:
Verne, B. Michael
Subject:
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.
ISSUE:
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?
ANALYSIS:
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).
CONCLUSION:
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.