Question
From: (redacted)
Sent: Tuesday, February 14, 2006 3:19 PM
To: Verne, B. Michael
Subject:HSR Analysis
Mike,
I thought email may be themost effective way tc check our analysis of a HSR reportability question.
Cur client, A, has formed anew corporation, B, for the purposes of acquiring 100% of the voting securitiesof Target. B is its own UPE and has no revenues or assets other than cash fromA to be used to acquire Target's voting securities. B intends to acquire Targetand issue 100% of B's voting securities to Target's management. In the sametransaction, B will also issue A convertible voting securities and thecontractual right to appoint 40% of B's board of directors. Upon conversion, Awill have the right to appoint 100% of as board, but A has no present intentionto convert.
Our analysis is that:
1. B's acquisition of Targetis below the size-of-the-person test as B is its own UPE and has less than$11.3 million in assets.
2. A's acquisition of B'sconvertible securities should be treated as an acquisition of 40% of B's votingsecurities (the portion of convertible securities that would convert intoenough shares to appoint 40% of B's board per Int. 70).Since, 40% of the acquisition price is below the $56.7 million threshold nofiling is required until A converts.
Is this correct?