Wednesday, March 28, 2012 3:01 PM
Verne, B. Michael
Size of Transaction Inquiry
I'm working with (redacted)on a new matter. We are hoping to get your assistance on a question
that has come up withregard to the size of transaction test. Please see the fact pattern below. Weappreciate your assistance.
We represent Company A,which is proposing to acquire all of the issued and outstanding votingsecurities of Company B, a private issuer (the "Transaction"). Assumethat the size of parties test is satisfied and that the total consideration,but for the analysis detailed below, would be in excess of the size oftransaction threshold.
The consideration for theTransaction includes: (i) funds being paid to retire two outstanding loans madeindirectly by certain shareholders of Company B to Company B, (ii) funds beingpaid to the holders of a class of non-voting stock of Company Band (iii) fundspaid to the holders of voting securities of Company B. Although it seemsclearly established that the amounts in (ii) are not considered in theacquisition price whereas the amounts in (iii) are, we are seeking yourguidance on the repayment of the shareholder loans at issue in (i).
For purposes ofdetermining whether the size of transaction test is satisfied in relation tothe repayment of the shareholder loans, we are aware that assumption orrepayment of debt by the buyer (or the repayment of such debt by the sellerwith closing proceeds) is not included in the size of transaction test',regardless of to whom such payments are owed.' In this instance, theshareholders of the creditor are also shareholders of Company B but by ourcalculus it should not matter whether such shareholders are controllingshareholders or minority shareholders of Company B. (We can confirm that notall shareholders of Company Bare creditors and thus there will not be paymentsin satisfaction of Company B's debt obligations across the board.) Pleaseconfirm that you are in agreement with this approach and that the amountsdescribed in (i) and (ii) above are not included in determining the acquisitionprice for purposes of the size of transaction.
1 Informal Interpretation0803012: http://www.ftc.gov/bc/hsr/informal/opinions/0803012.htm
2 Informal Interpretation 0805010: http://www.ftc.gov/bc/hsr/informal/opinions/0805010.htm