Question
September 22, 2005
Michael B. Verne, Esq.
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Washington, DC 20580
Re: HSR Interpretation
Dear Mike:
Thisis to confirm the telephone conversation you had with (redacted) and myself on September 21, 2005, in which you agreed that the reportingrequirements of the Hart Scott Rodino Antitrust Improvements Act andimplementing regulations (the "HSR Act")would be applied to a transaction with the following aspects in the mannerdescribed below:
FACTS:
Aspect1: Acquirer intends to acquire 100% of the voting securities in two separatecorporations, Target A and Target B. Target A's Ultimate Parent Entity("UPE") is an individual, Jane Doe. Target B is its own UPE, but JaneDoe owns 16.7% of the voting securities in Target B.
Aspect2: Acquirer is paying a purchase price of $60 million for Target A. Prior toclosing, Target A holds debt in the amount of $5 million to an institutionalfinancing source and debt in the amount of $5 million to an independentcorporation ("Non-Target") also controlled by Jane Doe. Non-Target isnot being acquired by Acquirer and is not a party to the transaction. Duringclosing, Target A will repay in full the balances on both debts, and Acquirerwill take possession of the voting securities of Target A only after such debtshave been extinguished.
ANALYSIS AND CONCLUSION:
Aspect1: Because Target B is its own UPE, the acquisition of Target A and theacquisition of Target B are evaluated separately for whether they meet thesize-of-transaction test. Further, there is no aggregation of the Target Bvoting securities being sold by Jane Doe with the Target A voting securitiesshe is selling for the purpose of determining whether either acquisition meetsthe size-of-transaction test for reporting requirements.
Aspect2: The amount of the repayment obligation on both the institutional debt andthe debt to Non-Target offsets the purchase price, so that the purchase priceis reduced from $60 million to $50 million for the purpose of determining ofwhether the transaction meets the size-of-transaction test for reportingrequirements.
Pleaseconfirm that this is the correct interpretation of reporting requirements.Thank you for your time and consideration of this matter.