Question
From:
Verne, B. Michael
Sent:
Tuesday, September 25, 2012 3:59 PM
To:
(Redacted)
Cc:
Walsh, Kathryn
Subject:
RE: quick hsr question
Itis based on the statutory language that bases the fee on the "value ofvoting securities held as a result of the acquisition". You can use 802.4to analyze whether the underlying non-exempt assets are valued at less than$68.2 million (which in your case they are not) in which case the acquisitionof Target's voting securities would be completely non-reportable. Once you havedetermined under 802.4 that the acquisition of the top level entity is notexempt, you are deemed to hold all of the voting securities of Target, valuedat the total acquisition price. See the interplay between 802.4 and the size oftransaction in the following link.
http://www.ftc.gov/bc/hsr/8024tipsheet.shtm
Alsosee the discussion for 803.9 in the following link to the 2003 SBP where one ofthe comments is advocating that the filing fee for acquisitions of foreignissuers or assets should be based only on the US component of the acquisition, andour response on why we believed that was in conflict with the statute.
http://www.ftc.gov/os/fedreg/2003/january/030117premergernotification.pdf
From: (Redacted)
Sent: Tuesday, September 25, 20123:47 PM
To: Verne,B. Michael Subject:
Re: quick hsrquestion
Thanks.Is there a reason behind this, it seems not what the underlying statutes say(re exempt businesses/assets can't be "held" by a buyer, and 802.4allows a look thru so as to eliminate this seeming distinction without adifference). Thanks again.
From: Verne, B. Michael [mailto:MVERNE@ftc.gov]
Sent: Tuesday, September 25,201203:28 PM
To: (Redacted)
Cc: Walsh, Kathryn<kwalsh@ftc.gov>
Subject: RE: quick hsr question
Thatwould be true if Buyer was purchasing the subsidiaries directly. Here, you saythat Buyer is purchasing Target, so the value for purposes of determining thefiling fee is based on the full acquisition price that is being paid forTarget.
From: (Redacted)
Sent: Tuesday, September 25, 20123:10 PM
To: Verne,B. Michael
Subject: quick hsr question
HiMike-
QuickHSR question that I hope you can help with soon as you have a chance.
Buyeris purchasing Target, which own subsidiaries, some of which are U.S. issuersand some of which are foreign issuers. The foreign issuers hold foreign assetsand do not have, in the aggregate, sales in or into the U.S. of at least $68.2million. Therefore, they are excludable under Section 802.50. The fair marketvalue of the U.S. subsidiaries is over $68.2 million, so a filing is required.The question is what is the appropriate filing fee basis. Our analysis is asfollows:
Inthe relevant statutory section setting filing fees, it says that the fees areset based on the transaction size as "determined under section 7A(a)(2)." 18 USC 7A(a)(2) defines the "size of transaction," andis further clarified in the regulations.
Inparticular, 16 CFR 801.15 states that:
"Notwithstanding801.13, for purposes of determining the aggregate total amount of votingsecurities, non-corporate interests and assets of he acquired person held bythe acquiring person under Section 7A(a)(2) and 801.1(h), none of thefollowing will be held as a result of an acquisition:
(d)Assets or voting securities the acquisition of which ... is exempt, under802.50(a), 802.51(a), 802.51(b) of this chapter unless the limitations, inaggregate for 802.50(a), 802.51(a), 802.51(b), do not apply or as a result ofthe acquisition would be exceeded, in which case the assets or votingsecurities so acquired will be held."
Here,because the Target's foreign assets are excludable under 16 CFR 802.50(a),based on the above-quoted language from Section 801.15, the foreign assets arenot "held" as the result of the acquisition. Therefore, they wouldnot count toward calculating the size of transaction or the filing fee.
Thisinterpretation is further supported by 16 CFR 803.9 Example 5, which providesthe following:
"A"contracts to acquire all of the assets of "B" for in excess of $500million (as adjusted). The assets include hotels, office buildings, and rentalretail property, all of which are exempted by 802.2. Section 802.2 directsthat these assets are exempt from the requirements of the act and thatreporting requirements for the transaction should be determined by analyzingthe remainder of the acquisition as if it were a separate transaction.Furthermore, 801.15(a)(2) states that those exempt assets are never held as aresult of the acquisition. Accordingly, the aggregate amount of the transactionis in excess of $100 million (as adjusted), but less than $500 million (asadjusted). "A" will be liable for a filing fee of $125,000, ratherthan $280,000, because the value of the transaction is not less than $100million (as adjusted) but less than $500 million (as adjusted). Note, however,that "A" must include an attachment in its Notification and ReportForm setting out both the in excess of $500 million (as adjusted) totalpurchase price and the basis for its determination that the aggregate totalamount of the acquisition under the rules is between $100 million (as adjusted)and $500 million (as adjusted) rather than in excess of $500 million (asadjusted), in accordance with the Instructions to the Form.
Thisexample makes clear that assets that are excludable are not included in thefiling fee calculation. Likewise here, the excludable assets under 802.50 wouldnot count toward the calculation of the filing fee, so the appropriate size oftransaction upon which the fee should be based is the value of the U.S. assetsbeing acquired and "held," not counting the foreign excluded assets.
Doyou agree?