We agree that A and C would be entities. We agree that if they only hold cash for the transaction and will not have a balance sheet by closing, they would not meet SOP, barring any 801.90 issues.
Question
I’m writing to confirm that the following transaction would not be reportable:
In a transaction that will be valued between $126.4 million and $505.8 million, Company A, an LLC, will acquire 100% of the capital stock of Company B. Company A has not yet been formed but will be either (1) a wholly owned subsidiary of a federally recognized tribe or (2) a wholly owned subsidiary of Company C, a to-be-formed holding company that will be a wholly owned subsidiary of the tribe.
Under 801.1(a)(2), the term “entity” does not include any foreign state, foreign government, or agency thereof. 16 C.F.R. § 801.1(a)(2). I understand that the PNO’s position is that a federally recognized tribe is not an entity subject to HSR filing requirements under this rule; however, its wholly owned subsidiaries are. See HSR Informal Interpretation Letter #1204009.
Thus, if Company A is formed as a wholly owned subsidiary of the tribe, and the tribe has the right to all of its profits and all of its assets upon dissolution, Company A would be an “entity” subject to the HSR Act and its own UPE. However, if Company A is a newly formed entity without a balance sheet, and its only assets are cash that will be used as consideration for the acquisition, Company A would not meet the size of person test. See 16 CFR § 801.11(e)(1); HSR Informal Interpretation Letter #1204011. Do you agree?
As to the other proposed structure, in that scenario, the tribe would form a wholly owned holding company, Company C, which would be its own UPE, would have no balance sheet, would hold 100% of the membership interests in Company A as its only assets, and would have the right to all of Company A’s profits and all of Company A’s assets upon dissolution. Company A, the newly formed operating entity, would also have no balance sheet, and its only assets would be the cash for the acquisition. It appears that the exemption would still apply regardless of the extra layer in the transaction. See HSR Informal Interpretation #0912008; see also HSR Informal Interpretation #1906001 (relying on #1906001). Do you agree?
Thanks in advance, and please let me know if you have any questions.