Question
From:
(redacted)
Sent:
Friday, December 05, 2008 3:39 PM
To:
Verne, B. Michael
Subject:
RE: HSR Inquiry on Valuation of Voting Securities
Mike
Thank you againfor the assistance.
Based on yourresponses, I have performed some additional research and would like to clarifythe transaction structure that I previously described to you and ask for yourguidance on whether this will change who is an acquiring and acquired personfor HSR Act purposes, as well as the number of potential HSR Act filings that mightbe required. The transaction still consists of a merger involving Corporation Xand Corporation Y, but I have provided additional information regarding the UPEof Corporation Y ("UPE Y") which I think impacts the analysis.Illustrative charts of the transaction structure are attached to this email toaid in the analysis.
ExpandedTransaction Structure Explanation
Currently, UPE Ycontrols Holdco Y. Holdco Y directly holds 100% of the voting securities ofCorporation Y. In the proposed transaction, Corporation X, which is its own UPEprior to the transaction, will create a wholly owned corporate subsidiary("Sub A"). Sub A will be merged with and into Corporation Y in areverse triangular merger, with Corporation Y designated as the survivingcorporation. in connection with the merger, Holdco Y will receive approximately60% of the outstanding voting securities of Corporation X. The interests of theshareholders of Corporation X prior to the merger will be diluted toapproximately 40%.
Analysis-Acquiring and Acquired Persons
As a result of themerger, UPE Y will become the UPE of Corporation X. Corporation X includes thecorporation in existence prior to consummation (Corporation Y) designated asthe surviving corporation. It is my understanding that pursuant to 16 CFR801.2(d)(1 )(ii), UPE Y is therefore deemed to have made an acquisition ofvoting securities, and is the only acquiring person in the transaction. Can youconfirm that this understanding is correct?
Additionally,because Corporation X will no longer be a person as a result of thetransaction, but rather a subsidiary of UPE Y, Corporation X cannot be anacquiring person that holds any assets or voting securities which it did nothold prior to the transaction. Instead, Corporation X is only an acquiredperson based on the fact that as a result of the transaction its votingsecurities will be held by UPE Y. (See 16 CFR 801.2(d)(2)(i) and (Ii); PNOinformal Interpretation 0405008). As a result of the foregoing, it is myunderstanding that Corporation X's acquisition of Corporation Y is notreportable. Can you confirm that this understanding is correct?
Analysis-Valuation of Acquisition
Finally,consistent with your previous email, because Corporation X is a privately heldcorporation, the value of the transaction is the acquisition price for thevoting securities in Corporation X that will be acquired by Holdco Y, ifdetermined, or the fair market value of the stock as determined by the board ofdirectors (or the board's delegate) of UPE Y. Therefore, assuming that theacquisition price is undetermined, and UPE Y's Board of Directors determinesthat the fair market value of Corporation X is $50 million, the value of 60% ofCorporation X's shares would be $30 million. Can you confirm that thisunderstanding is correct?
Thank you forconsidering these three inquiries.