Question
March 1, 2004
VIA;FACSIMILE
Michael H. Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission T Room 303
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mike:
Thisletter is confirming our telephone conversation on Friday, February 27, 200$ regarding thefiling requirements of the Hart-Scott-Rodino Antitrust Improvements Act or1976, as amended, 15 U.S.C. 18a (the "HSR Act" or the"Act"), and the rules promulgated thereunder, 16 C.F.R. 801.10et seq. (the "Rules"), relating to an acquisition of votingsecurities and subsequent redemption of stock,
Asdiscussed, Company A will acquire less than $50 million in voting securities ofCompany B. There are two possible scenarios for this acquisition. In scenario1, A would control B through its acquisition of the voting securities, while inscenario 2, A would not control 8 through this acquisition. In either scenario,immediately after A's acquisition of voting securities in B (In a virtuallysimultaneous closing), B will redeem voting securities of B owned by C for lessthan $50 million (using the cash from A and loan proceeds from a third-partylender to pay C). Upon the redemption, A will control B.
Assumefor purposes of this analysis that the parties meet the size-of-personthresholds and that the structure of the transaction has a legitimate businesspurpose. As we discussed, because the value of A's acquisition of B stock wouldbe below the $50 million size-of-transaction threshold, A would not have afiling under the Act for this acquisition. Further, no filing would be requiredfor the redemption transaction, regardless of whether A controls 13 at the timeof the redemption, because the 802.30 intraperson exemption would apply.
Thequestion I posed to you was whether the value of A's acquisition of voting securitiesand the value of B's subsequent redemption would have to be aggregated. As
we discussed, so long as there isa legitimate business purpose for the structure of the transaction, the PNO would not view it asa transaction or device for avoidance under 801.90. Accordingly,the values of the transactions would not be aggregated for purposes of thesize-of-transaction test. You agreed that informal interpretation No. 190 doesnot change this analysis. Therefore, the values of A's purchase of votingsecurities of B and B's redemption of voting securities from C would not beaggregated, and no filing ling would be required,
Pleaselet me know if I have misunderstood any part of our conversation. Thank you foryour attention to this matter.