Question
July 9, 2003
By E-mail
Nancy M. Ovuka,
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Dear Ms. Ovuka:
The purpose of this letter is toconfirm the advice that you gave me by telephone on July 1, 2003. In our telephone conversation, I advised you that my client(Company A) plans to acquire, by merger, Company B. Because Company B is not apublicly traded company, we discussed the fact that, for valuation purposes,the value of the Company B shares that will be "acquired" as resultof the merger, is equal to the value of the Company A shares that will bereceived by Company B's shareholders. I also advised you that severalshareholders of Company B hold options to acquire additional shares of CompanyB, and that, as part of the plan of merger, those Company B stock options willbe converted into options to acquire shares of Company A.. T further advisedyou that the Company B shareholders who receive the Company A stock optionswill not exercise those options at the time of the merger. I asked you whether,for purposes of valuing the transaction, it is necessary to include the valueof the Company A stock options that certain shareholders of Company B willreceive in return for their Company B stock options. You advised me that,pursuant to HSR Rule 801.15, it would not be appropriate to include the valueof those options because Company A is issuing those options as considerationfor the Company B stock options, and the acquisition of stock options is exemptpursuant to HSR Rule 802.31.
Please let me know if, for anyreason, the preceding summary of our conversation does not accurately conveythe advice that you provided to me. As always, I very much appreciate youradvice and assistance.