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Date
Rule
802.4, 802.30
Staff
Michael Verne
Response/Comments
1) Agree 2) Agree 3) No -A's acquisition of B is not exempt because you look at 802.30 going into the transaction. X is an acquired person at that point, but not an acquiring person because A is its own UPE.

Question

From: (Redacted)
Sent: Tuesday, June 29, 20108:09 PM
To: Verne, B. Michael

Subject: 7A(c)(10) and 802.30 Issue

Mike,

I am writing to seek your view on theapplicability of the HSR Act to the following transaction:

Company A is a publicly traded specialpurpose acquisition company (SPAC) and its only assets consist only of cash,cash equivalents and US treasuries. Company A is not newly-formed and hasregularly prepared financial statements. It is its own ultimate parent entity(UPE) and Funds X, Y and Z each own approximately 20% of the voting securitiesof Company A.

Company B is a publicly traded companywith substantial operating assets. Funds X, Y and Z own respectively,approximately 51 %, 10% and 4% of the voting securities of Company B.

Funds X, Y and Z plan to contributetheir shares of Company B to Company A in exchange for shares of Company A. Asa result, X, Y and Z will own respectively approximately 70%, 16%> and 8% ofthe voting securities of Company A.

My analysis of the transaction is asfollows:

1. Fund X's acquisition of voting securities of CompanyA is exempt under Rule 802.4 because the assets of Company A, following itsacquisition of more than 50% of the shares of Company B, will consist only ofassets the acquisition of which would be exempt under Rule 801.21 (cash, cashequivalents and treasuries) and Rule 802.30 (assets of Company B which isalready controlled by Fund X).

  • Funds Y and Z's acquisitions of voting securities of Company A are exempt under Section 7A(c)(1 0) because Y and Z's percentages of the voting securities of Company A will decrease as a result of the transaction.
  • Finally, is Company A's acquisition of control of Company B exempt under Rule 802.30 since Fund X is both the acquired person (as the UPE of Company B) and the post-acquisition UPE of Company A, even though Fund X is not the pre-acquisition UPE of Company A?

    • 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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