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Date
Rule
802.21
Staff
Michael Verne
Response/Comments
You are correct that the shareholders who will hold a higher percentage in Splitco than they did in Parent would have a potential reporting obligation. 802.21 would not exempt this because Splitco is a different issuer. We reevaluated this decision as a result of the introduction of the dollar thresholds. Prior to that we said that 802.21 would cover this situation as long as a new percentage threshold was not exceeded. With the dollar thresholds adjusted annually, complications were introduced that made applying this position too difficult to administer.

Question

From:

(redacted)

Sent:

Thursday, May 29,20085:13 PM

To:

Verne, B. Michael

Subject:Hypothetical

Hi Mike. I'm hopingthat you can help me sort through this scenario. It is not clear to me.

Shareholder wascleared at the 25% threshold to acquire Parent stock and busted that thresholdwithin one year of filing. Shareholder's five years runs in Mayor June of 2009.Parent has several classes of tracking stock that all vote together in theelection of directors. Parent is considering a "split off' pursuant towhich holders of Tracking A stock will redeem their Tracking A shares forshares of a newly formed company (Splitco) that will hold the current parentsubsidiaries that are tracked by the tracking A stock. This is not a pro rataspin off since the holders of other tracking stock will not get stock ofSplitco. Accordingly, the Tracking A shareholders will hold more of Splitcodirectly than they now indirectly hold (through their ownership of Parenttracking stock) in the subsidiaries that will be put into Splitco. I believethen that this split off is a potentially reportable event for anyTracking A shareholder who meets the jurisdictional tests. If so, doesShareholder's previous filing for an acquisition of Parent stock covers hisacquisition of Splitco stock provided that it is consummated within the 5 yearperiod and does not result in him owning 50% or more of Splitco's votingsecurities?

Thank you.

About Informal Interpretations

Informal interpretations provide guidance from PNO staff on the applicability of the HSR rules to specific fact situations. They do not necessarily reflect the position of the Commission. 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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