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Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Neither reduction would be appropriate. Shareholder 1, through its control of B, holds assets valued at $53MM as a result of the acquisition. Shareholders 2s acquisition of voting securities of B is a separate transaction. N. Ovuka concurs.

Question

From: (redacted)
Sent: Wednesday, December 08, 2004 11:31 AM
To: Verne, B. Michael
Cc: (redacted)

Subject: hypothetical question

Company A isselling assets to Company B.

Company A isowned 70% by Shareholder #1 and 30% by Shareholder #2

Company B isowned 70% by new shareholder and 30% by shareholder #2. Company B is formed toacquire the assets of Company A.

The assets of Aare sold to B for 40 million cash plus 13 million of assumed liabilities.

Of the proceedsof the sale to A, shareholder #2 will receive 12 million and reinvest 6 millionin company B for the 30% share.

QUESTION: canthe acquisition price be reduced by either the 30% shareholder #2 held in bothA and B in common?

Can theacquisition price be reduced by the 6 million cash reinvested in B byshareholder #2?

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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