We disagree with your conclusion. For HSR purposes, an undivided interest in an asset pool is an asset itself, and even if the acquiring person already holds a 50% or greater undivided interest in the asset pool, further acquisitions are not exempt under Section 802.30. See Interpretation 27 in the Premerger Notification Practice Manual, 5th Ed.
Question
I am writing to confirm that you agree with our analysis of the following transaction.
I represent an industrial company (Company A) that is seeking to buy a 49% interest (over a series of transactions) in facility assets held by a seller (Company B) for a value in aggregate well in excess of the current size-of-transaction threshold. The target assets will be held by Company A and Company B as tenants in common. Given prior PNO informal interpretations on this topic (see, e.g., 0806024 Informal Interpretation | Federal Trade Commission), even though Company A will own less than 50% of the target assets and will have very limited control rights, because it will be a tenant in common with Company B, we are treating its ownership of the target assets as if they were a unitary whole and then assessing the relative value of the transaction for purposes of considering whether the HSR size-of-the-transaction threshold is met.
Company A will be purchasing its interest in the target assets, including two separate facilities and shared assets, in stages: (1) 5% in the target assets for approximately $143m expected to close in early 2027; (2) 5% in the target assets for approximately $143m expected to close in early 2028; (3) (a) 19.5% of the shared assets and (b) 39% of one facility, collectively, for approximately $557m expected to close in 2030; and (4) (a) 19.5% of shared target assets and (b) 39% of the remaining facility, collectively, for approximately $557m expected to close in 2033.
Prior to the first closing, Company A and B will enter a binding agreement that covers all four stages. We believe that Company A’s purchase of its initial 5% interest in the target assets in early 2027 almost certainly will be an HSR reportable event (because we assume that the initial investment of $143m will exceed the HSR size-of-transaction threshold in effect at that time) because the assets will be held between Company A and Company B as tenants in common. However, following the closing of the initial investment, given that Company A will own the target assets as if they were a unitary whole, Company A would effectively have control already over the assets at that point for HSR purposes, such that we believe that further HSR filings would not be necessary for the subsequent investments in 2028, 2030, and 2033.
For purposes of calculating the filing fee for the HSR filing for the initial investment in 2027, we believe that the HSR size of transaction would be the value of that initial investment (i.e., approximately $143m) and that we would not take into account the subsequent investments in 2028, 2030, and 2033.
We would be grateful if you could confirm our analysis that only a single HSR filing will be required for the initial investment scheduled to close on in early 2027 (requiring an HSR filing fee based on a transaction value of approximately $143m), and that no HSR filings would be required for the subsequent investments in 2028, 2030, and 2033.