Question
December 4, 2002
Marian Bruno, Esquire
Assistant Director, Premerger Notification
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Re:
Dear Ms. Bruno:
On March 27, 2001, our client, (redacted) filed premerger notification pursuant to the Hart-Scott-Rodino Act, 15 U.S.C. 18a ("HSR Act") reporting its intent to purchase all outstanding shares of (redacted) through a tender offer pursuant to French law. After a brief preliminary investigation conducted by the Federal Trade Commission, the waiting period under the HSR Act expired on (redacted). (Redacted) subsequently completed the tender offer on (redacted), acquiring approximately 81.3 percent of (redacted) outstanding shares through the offer and approximately 14 percent more through other means.
As you may remember from our discussions about this transaction at the time it was filed, French corporate law generally does not permit the conditioning of the completion of tender offers. However, the transaction was also subject to prior approval under the EC Merger Control Regulation. Article 7(3) of the EC Merger Regulation -- perhaps in response to French taw - permits shares to be taken up pursuant to a tender offer while a notification is pending with the Commission as long as the acquiror does not vote those shares while the Commission's review is underway. Accordingly, (redacted) was permitted to (and did) acquire the voting securities of (redacted) well prior the completion of the EC's review (but after expiration of the HSR waiting pert s). (Redacted) has held those shares continuously since it first acquired them, although it has not been free to vote them except by derogation from the Commission.
On (redacted), the European Commission issued an order prohibiting the transaction as well as a divestiture decision, putting in place a trustee to monitor (redacted) business and the .divestiture process. (Redacted) appealed both the prohibition order and the divestiture decision and was allowed to continue to hold (but not vote) the shares before the issuance of the Court judgment on the prohibition order. On (redacted), the Court of First Instance ("CFI") annulled the Commission's prohibition order and, as a result thereof, the divestiture decision: (redacted) plans to retain ownership of (redacted) and begin voting the (redacted) shares it holds. It is seeking a clearance decision from the European Commission on the "remand" from the CFI's annulment decision. We write because (redacted) believes it is not required to make any additional filings pursuant to the HSR Act to retain ownership or begin voting the (redacted) shares it currently holds.
You may remember that prior to filing the HSR notification on behalf of (redacted), we contacted your office to determine whether, in light of the operation of Article 7(3) prohibiting (redacted) from voting the shares until the favorable completion of the EC merger review process, the acquisition o arcs would be the acquisition of convertible voting securities (as defined in 16 C.F.R. 801.1(f)(2)) and therefore exempt from the requirements of the HSR Act pursuant to 16 C.F.R. 802.31. See Letter to Marian Bruno from (redacted) and (redacted) dated March 21, 2001. You informed us that the Commission staff did not agree that the operation of Article 7(3) caused the (redacted) shares then to be acquired by (redacted) to be convertible securities, but that if (redacted) were required to take the shares under French law prior to expiration of the waiting period, then the conflict in laws might be resolved by placing the shares in escrow. Because of the speedy review of the transaction by the Federal Trade Commission, the escrow arrangement proved unnecessary.
We are aware that under 16 C.F.R. 803.7, a notification under the HSR Act expires one year after the expiration of the waiting period, and that more than a year has passed since the expiration of the waiting period on (redacted) acquisition of (redacted) shares. Our view is, however, that no new filing is required. we believe this for two reasons: first, the acquisition notified on (redacted) -- the acquisition of (redacted) shares through a tender offer -- in fact was completed on (redacted), well in advance of the expiration of the notification. Second, as a result of the CFI's decision, the European Commission has restarted its review of the transaction and, as soon as that review is favorably completed, Article 7(3) will cease to control (redacted) voting rights and it will be able to vote the shares it has now held for 18 months. Given the staff's position that the shares were voting securities subject to the HSR Act when they were acquired in 2001, the lifting of the prohibition under Article 7(3) should not make any difference for HSR purposes.
Please contact me at your earliest convenience if you disagree with this analysis.
Thank you for your attention to this matter.