1302002 Informal Interpretation

Michael Verne

Because the stock purchase agreement is not a certainty, you
would not aggregate the value of the voting
securities with the value
of the exclusive portion of the license at the time
of entering into the licensing
agreement. Since you are not sure
whether you will
be making the second payment
for the license (in the event
the SPA is not agreed
upon), the acquisition price is undetermined, so you would
do a FMV on the exclusive portion of the license. If you later agree
on the stock purchase, its value
still would not be
aggregated with the value
of the license, even if that acquisition was not reportable, because
you don't aggregate a stock acquisition
with an earlier asset acquisition. 
K Walsh and S Pope concur.


From: (Redacted)

Sent: Tuesday,February 05, 2013 5:16 PM

To:Verne, B. Michael

Subject:Valuation question

Hi, Mike:

I hope everything is going well with you (I'm guessingso with the Ravens' big win Sunday:-).It turned out to bequite a nail biter in the end.

Per my voice mail, I just want to make sure I'm calculating a purchase price accurately. Seller has been involved in negotiations to sell 100% of the voting securities of its wholly ownedsubsidiary, Company X, to Buyer. The negotiations moved somewhatslowly, and at Buyer's requestand in contemplation of the stock acquisition, the parties recently entered into a partially exclusivelicense agreement prior to the completion of the SPA. As part oftl1at license agreement, Buyer would be obligated to pay an additionalfee as consideration for tl1e continued grant ofrights if the SPA was not signedby a certain date (although the fee would be waived if closing actuallydid occur prior-for to another specified date).

1. Shouldthe exclusive portion of the licensebe valued and aggregated with tl1e value of the stockacquisition in calculating tl1e Size of Transaction (notingthat if the exclusive licensehad not been granted early, any suchrights would have simply been transferredas part of tl1e stock acquisition)?

2. Assuming neither the signingnor the closing dates are met, should that additional fee provided for in the license agreement be taken into account in determining if the Size of Transaction test is met? Wouldit change the analysis if the sig11ing date was not met but tl1e closing date was, but tl1e Seller decidedto negotiate to get the additionalpaymev.t anyway?

Please don't hesitate to let me !mow ifit would be helpful to discuss or if you need any additional information. Thanks so much,

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