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Date
Rule
801.11(e)
Staff
Michael Verne
Response/Comments
Any funds that will be exhausted as a result of the transaction can be excluded under 801.11(e), so the cash to pay off the debt does not count toward the size of person.

Question

From:

(Redacted)

Sent:

Tuesday, October 16, 2012 11:29 AM

To:

Verne, B. Michael

Subject:

Size of Person Q

HiMike,

Wehave a client that is acquiring the shares of a target (Target) through a newlyformed entity (UPE). UPE has more than two investors, none of whom control itand does not have a balance sheet. UPE will be funded with approximately $300million dollars --$250 million for the acquisition of the shares of the Targeton a debt free basis and $50 million is allocated to payoff the Target's debt(it is not yet clear whether the debt will be paid off directly by UPE or if itwill go to the Seller (Target's parent) and the Seller will payoff the debt) +potentially some additional cash for other transaction expenses.

I'massuming the transaction value here is $250 million, and therefore thesize-of-person threshold applies. Would we need to count the $50 millionallocated to the debt pay-off toward the $13.6 million size-of-person thresholdor is the $50 million considered "cash that will be used for expensesincidental to the acquisition" under 801.11(e)?

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