1308001 Informal Interpretation

Michael Verne

The comity exception does not apply when the acquiring person will hold a controlling interest as a result of the secondary acquisition. If B has sufficient nexus with the US, the transaction is reportable.


From: (Redacted)
Sent: Monday, August 26, 2013 5:29 PM
To: Verne, B. Michael
Subject: RE: Secondary Acquisition


I thought I would send an email in case that was easier for you.

My client, Company A, is a foreign person. It intends to make an acquisition of shares of Company B, a foreign issuer. Company A currently holds a minority of the shares of Company B. As a result of the acquisition of the additional Company B shares, Company A will acquire control over Company B. This would be a reportable transaction.

Rather than acquiring the shares of Company B directly, Company A is considering acquiring 100% of the shares of Company H, the sole shareholder of Company B. Company H is a holding company and it holds only a minority interest in Company B. There are bona fide corporate reasons for choosing this structure. If the shares in Company B are acquired indirectly through the direct acquisition of Company H, does that impact the HSR analysis? Interpretation 223 in the ABA Premerger Notification Practice Manual (4th Ed.) states that "in the context of an acquisition by a foreign person of a foreign issuer, any secondary acquisitions are exempt based on the principles of comity." Would that same general principle apply here? It would seem that the foreign/foreign nature of the transaction is what gives rise to the comity principle. Or does the fact Company A is indirectly acquiring control over Company B result in the secondary acquisition being reportable? Grateful for your guidance as usual.

About Informal Interpretations

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.

Learn more about Informal Interpretations.