Question
Following up on our telephone conversation of April 18, 2000, the following is a description of the proposed transaction as restructured pursuant to your phone call. Attached is a schematic illustrating the transactions described below. As additional background, it should be noted that B Corp. has three classes of stock. Class B stock carries the right to ten votes per share. Class A and Class C stock each have the right to one vote per share.
First Merger. Acquisition Corp. will merge into C Corp., with C Corp. as the surviving entity. As merger consideration, B Corp. (the sole shareholder of C Corp.) will receive an additional 8% of the outstanding voting securities of B Corp. The percentage of voting securities of B Corp., held by the other B Corp. shareholders will decrease proportionately (see Diagram 2) [see attached .pdf file]. We believe that all aspects of this transaction are exempt from §802.30.
Second Merger. Immediately after the First Merger, B Corp. will form a wholly-owned subsidiary, Holding Sub, which will hold 100% of the voting securities of C corp. (see Diagram 3) [see attached .pdf file]. A Corp. will then merge into Holding Sub, with Holding Sub as the surviving entity. As merger consideration, the A Corp. shareholders will hold directly 73% or less of the outstanding voting securities of B Corp. (see Diagram 4) [see attached .pdf file]. We believe that the formation of Holding Sub and the merger of A Corp. into Holding Sub are also exempt pursuant to §802.30. [7A(c)(10)]
As a result of the Second Merger, several of the former A Corp. shareholders will hold an aggregate total amount of voting securities of B Corp. in excess of $15 million. Many of these shareholders will be eligible for the “investment only” exemption under §802.9. We believe that the remaining shareholders will be exempt from HSR filing requirement under Section 7(A(c)(10) of the Act because the percentage of voting securities of B Corp. held by each such person (indirectly before the Second Merger and directly thereafter) will decrease following the Second Merger. This decrease is a result of the fact that in the Second Merger the A Corp. shareholders will receive fewer ten vote shares of B Corp. than were formerly held by A Corp. and are thereby diluted in the voting percentage.1 [Nor, however, that any current B Corp. shareholders who increase their percentage held in B Corp. may have a reportable obligation.]
We would like to confirm with you our understanding of the foregoing exemptions. I will await your call to discuss any factual questions you may have, as well as to set a time when we can visit with you by phone along with our co-counsel (redacted) in Washington, D.C.
Although their voting percentage will decrease, the A Corp. shareholders may have aslight increase in the economic value of their respective holdings in B Corp. as a result of theissuance of B Corp. shares in the Second Merger in recognition of controlling position of A Corp.in B Corp.