1206003 Informal Interpretation

Michael Verne

  – Agree – K Walsh


From: (Redacted)
Sent: Thursday, June 14, 2012 10:34 AM
To: Verne, B. Michael
Subject: Associate question in context of corporate UPE


Iwould like to confirm my understanding relating to the applicability of anassociates assessment for a corporate UPE.

Holdco,a corporation, will acquire shares of target, a US corporation, and thatacquisition will trigger HSR. Voting shares of Holdco are held 50/50 byInvestor A and Investor B. Investor A is a private equity company, and it holdsits stake in Holdco in three separate investment funds each of which is its ownUPE. Investor B is corporate entity, and it is the UPE of Holdco. Through ashareholder agreement, each of Investor A and B has the right to appoint halfof the board (which has an even number of board seats) of Holdco. This rightapplies collectively to the Investor A funds investing in Holdco, not to anyonefund or entity, so it is a right generally consistent with the Investor Avoting rights.

Thereis no separate agreement between Investor A, or any entities affiliated withInvestor A, and Holdco or Investor B giving Investor A the right to manageHoldco's investment decisions, and thus Investor A does not individually directHoldco's investment decisions. Instead, the investment decisions are managed byHoldco's board. It may be the case that the three funds affiliated withInvestor A are ultimately managed by the same top GP, but because no oneInvestor A GP entity has the right to manage Holdco's investments, I do notthink that any Investor A entity is an associate of Holdco. I believe thisconclusion is consistent with point 2 in the informal letter dated July 28,2011, and with the informal letter dated February 12, 2012. See http://www.ftc.gov/bc/hsr/informal/opinions/1107008.htmand http://www.ftc.gov/bc/hsr/informal/opinions/1202004.htm


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