1206002 Informal Interpretation

Form Item 4(c) and 4(d)
Michael Verne

  – Agree – K Walsh





Monday, June 11, 2012 5:09 PM


Verne, B. Michael


Question re Items 4(c) and (d)

CompanyA controls the general partner of Company B, a master limited partnership, butCompany A does not control Company B for HSR purposes. Company A is going tocarry out a "drop down" transaction where Company B will purchaseinterests in an LLC from Company A and Company B will file as the acquiringperson and Company A will file as the acquired person.

A.The only assets of the LLC relate to interests in another LLC which holds acontrolling interest in a newly built refined product pipeline. Company B has hadcertain studies done by third parties of the market into which the pipelinewill deliver product and those will be turned in as 4(c) or (d) documents

B.However, Company B and/or its Conflicts Committee of independent directors (andinvestment bankers retained by the latter) has prepared numerous modelsrelating to the transaction, all designed to assist in determining what wouldbe an appropriate price to pay for the pipeline assets, whether the transactionwould be accretive or not for Company B's unit holders, the likely amount ofpayouts under an earn out provision for Company A, the cost of carry andsimilar such matters. These make certain forecasts as to volumes of product tobe carried on the pipeline in the future, tariff levels, spot prices, etc. andinclude base levels, upside level, downside level and other variations. CompanyA has prepared similar such models to assist it in evaluating the appropriateselling price.

Myunderstanding is that none of the documents described in paragraph B abovewould be viewed as responsive to items 4(c) and (d) of the HSR form. Could youplease advise if you agree with this conclusion?

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