Question
October 20, 2004
B. Michael V erne
Premerger Notification Office
Federal Trade a Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
Dear Mr. Verne:
This letter will confirm our telephone discussion of October 12, 2004. The issue I raised with,you concerns the application of Section 7(A)(c)(10) of the Hart-Scott RodinoAntitrust Improvements is Act of 1976, as amended (the "HSR Act"), to aninitial public offering ("IPO"), where all current shareholders willhave their per centum holdings of the company ("the Issuer") reducedb in which certain of the existing shareholders will also acquire shares of theIssuer as a result of elated transactions undertaken in connection with theIPO. The acquisition of such additional hares by these certain currentshareholders will not result in an increase in their per centum share a of theoutstanding voting securities of the Issuer. However, it will result in theirper centum reduction of share holdings in the Issuer being somewhat less thanthe per centum reduction experienced by the remaining currentshareholders. Nonetheless, the acquisition of shares by s group of currentshareholders in connection with the IPO will not result in their increasing,directly or indirectly, their per centum share of the outstanding votingsecurities of the Issuer.
As described the relevant transactions hypothetically during our discussion, aprivately held comp y is currently contemplating an IPO that would dilute theper centum stock holdings of each of existing shareholders (the Issuer is itsown Ultimate Parent Entity). Integral to the IPO are a agreements between theIssuer and two separate LLCs (entities not within the Issuer) whose interestsare held (in different proportions) by certain of the current shareholders ofthe Issuer. The asset of one LLC consists of an office building. The assets ofthe second LLC consist of ' la airplanes used by the Issuer. As across-condition of the IPO, the LLCs will be dissolved, a assets of the LLCswill be acquired by the Issuer and the holders of the LLC interests 11 receiveshares of the Issuer in exchange for their interests in the LLCs. The totalfair market value of each of the LLCs is substantially less than $10 million.The group of current shareholders s will exchange their LLC interests for amodest number of additional shares of the Issuer as p part of the IPO. Noshareholder will increase his or her per centum share of the outstandingvoting securities of the Issuer as a result of the contemplated transactions.You agreed that in such circumstances Section 7A(c)(10) of the HSR Act would exempt theacquisition of voting securities of the Issuer by its current shareholders inthese transactions.
W recognize that, separately, the acquisition by the Issuer of all of theinterests (or the underlying assets) of the two LLCs are potentially reportableacquisitions of assets by the Issuer, assuming otherwise reportable transaction(i.e., the size-of-person and size-of-transaction tests are met and noexemption applies).
If you have any questions please do not hesitate to contact me at (redacted).Thank you for your assistance.