Sorry, you need to enable JavaScript to visit this website.
Skip to main content
Michael Verne


From: (Redacted)
Sent: Thursday, January 06, 2011 12:40 PM
To: Verne, B. Michael
Cc: : (Redacted)
Subject: HSR Advice - Application of Rule 802.4

Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580

HSR Advice--Application of Rule 802.4

Dear Mike:

We arewriting to confirm our understanding of our telephone conversation with you onJanuary 3, 2011 concerning the potential reportability under theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSRAct"), of a proposed transaction discussed below.


Buyer is aprivate investment fund and its own UPE. Seller is a publicly tradedcorporation. The transaction is structured as a merger, with the votingsecurities of the Seller to be retired at closing.

The totalconsideration to be paid to Seller's shareholders at closing exceeds thecurrent HSR Size of the Transaction threshold of $63.4 million. However,Seller's current balance sheet reflects significant cash. Seller's currentbalance sheet also reflects various liabilities, which Buyer will assume aspart of the acquisition.

Analysis ofRule 802.4

In anacquisition of voting securities, Rule 802.4, as revised, allows the parties tolook through to the underlying assets of the issuer or non-corporate entity todetermine whether an HSR filing is required. Under Rule 802.4, as revised, theacquisition of corporate stock will be exempt if the entity whose stock orinterests are being acquired does not hold more in nonexempt assets than thecurrent HSR Size of the Transaction threshold of $63.4 million. For purposes ofdetermining the amount of non-exempt assets, Section 801.21 provides that cashand cash equivalents shall not be considered an asset of the person from whichit is acquired.


You advisedthat for purposes of applying Rule 802.4 to this transaction, the cash and cashequivalents of the Seller should not be counted as non-exempt assets, and thereis no requirement to aggregate the value of assumed liabilities into thevaluation of the non-exempt assets or to value the assets as if unencumbered bythe assumed liabilities.

You alsoadvised that for purposes of the Fair Market Valuation of the assets of theSeller, the parties may reasonably rely on the arms-length negotiated purchaseprice to be paid to Seller's shareholders at closing for the voting securitiesof the Seller, minus the cash and cash equivalents reflected on Seller'scurrent balance sheet, even though that purchase price was established for avoting securities acquisition. Under this valuation, the current HSR Size ofthe Transaction threshold would not be met.

Based onthis advice, the parties do not intend to report this transaction under the HSRAct. Please let us know as soon as possible if you disagree with any of theconclusions discussed above, or if we have misunderstood any aspect of youradvice. Thank you for your assistance in this matter.

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.