Question
September 2, 2004
VIA FACSIMILE & FEDERAL EXPRESS
B. Michael Verne
U.S. Federal Trade Commission
Premerger Notification Office a
600 Pennsylvania Avenue, N.W.
Room 301
Washington, D.C. 20580
Re:Hart-Scott-Rodino Act ("HSR Act")/Bank Holding Company ActExemptions
Dear Mike:
Thankyou for taking the time to speak with me yesterday. I am writing to confirm theHSR Act advice we discussed.
Ourclient ("Buyer") is a bank holding company registered under the BankHolding Company Act ("BHC Act"), and it has executed anagreement to acquire (in a merger transaction) all the outstanding votingsecurities of another bank holding company registered under the BHC Act ("Seller"). Seller does not engage in so-called"4(k) activities" under 12 U.S.C. 1843(k), nor has itregistered as a "financial holding company" under the provisions ofthe Gram-Leach-Bliley Act of 1999. On August 6, 2004, Buyer filed applications with theappropriate Federal Reserve Bank pursuant to both Section 3 of the BHC Act, 12 U.S.C. 1842 (to acquire Seller's banking subsidiaries)and Section 4(c)(8) of the BHC Act, 12 U.S.C. 1843 (to acquireSeller's non-bang subsidiaries).
Sincethose filings were made, the staff of the Board of Governors of the FederalReserve System has determined that approval of Buyer's Section 4(c)(8)application is not required in order for Buyer to acquire Seller's non-bankingsubsidiaries. The basis for the staff's conclusion was two-fold: First, one ofthe Seller's non-bang subsidiaries is merely a vehicle for the issuance oftrust-preferred securities. The subsidiary's purpose is to sell these trustpreferred securities to investors and then lend the proceeds to Seller. Assuch, its activities are exempt from review under the BHC Act. See 12 U.S.C. 1843(c)(1)(C). Second, the remainderof the Seller's non-banking operations are equity investments in othercompanies, none of which accounts for 5 % or more of those companies'outstanding voting securities. As such, those investments may also be acquiredby Buyer without prior Federal Reserve approval. See 12 U.S.C. 1843(c)(6). Based on the staff's conclusion, Buyer withdrew its Section 4(c)(8)application on August 26, 2004.
Thetransaction continues to require bank agency approval under Section 3 of the BHC Act, 12 U.S.C. 1842, and no portion of Seller's operationsor businesses is subject to subject to Section 4(k) of the BHC Act, 12 U.S.C. 1843(k). We therefore concluded that thetransaction remains exempt from the notification requirements of the HSR Act pursuant to 15 U.S.C. 18a(c)(7), regardless of thevalue of Seller's non-bang subsidiaries. You indicated that this conclusion iscorrect.
Ihope this letter accurately summarizes the advice we discussed during ourtelephone conversation yesterday. If my summary of our conversation isincorrect in any way, please let me know as soon as possible. This again foryour time.