1210013 Informal Interpretation

Michael Verne

  – Agree. K Wash concurs.





Wednesday, October 24, 2012 4:48 PM


Verne, B. Michael




HSR Informal Opinion Request - Rule 801.10

Setforth below is a description of a proposed transaction and tentativeconclusions on whether the parties must comply with the notification andwaiting period requirements under the HSR Act. Please confirm the conclusionsstated or advise as to how the proposed transaction should be analyzed for thispurpose.

1. Buyer will acquire 100 percent of thevoting securities of Seller. Size of person tests are satisfied and noexemption appears to apply, but for reasons stated below the size oftransaction does not satisfy the minimum size of transaction threshold ($50M asadjusted, currently $68.2M).

2. The parties' agreement will providefor a gross cash purchase price of $98.5M (includes $6.5M for acquisition ofBuyer's voting securities held by Seller), subject to reductions for paymentsat closing as follows: (i) payoff Seller's existing bank debt and third-partysubordinated debt (projected to total no less than $42.5M); (ii) payoffSeller's transaction expenses for investment banker fees, attorney fees, andprepayment fee on debt (projected to total $3.5M); and (iii) payoff Seller'sobligations to staff, triggered by sale of the company, under a contractuallong-term incentive plan (none of the staff who will receive these paymentsholds a controlling interest in Seller's voting securities) ($6.5M).

3. Each pay-off at closing describedabove may be excluded from the purchase price for Seller's voting securities,as none of these payments is for the acquisition of voting securities, yieldinga net purchase price projected to be$46M ($98.5M less ($42.5M+$3.5M+$6.5M)).Thus, the total transaction value for the acquisition of Seller's votingsecurities is less than the current minimum size of transaction threshold, andthe transaction is not subject to the notification and waiting periodrequirements of the HSR Act.

4. Buyer is not required to make a fairmarket value determination of Seller's voting securities under Rule 801.10(c),if the parties' acquisition agreement provides for each of the pay-offsdescribed above and documents prepared for closing specify amounts for each payment.

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Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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