Question
From:(redacted)
Sent:Wednesday, May 24, 2006 9:28 AM
To:Verne, B. Michael
Subject:A scenario with questions
Michael:
Ihave an unusual transaction on which I need confirmation of the procedural way wepropose to handle it.
There is currently a foreignissuer whose stock is held 60% by X and 40% by our Client.
Sometime ago these two shareholders entered into a right-of-first-refusal buy-sellarrangement, under which either of the two shareholders can formally offer topurchase the other shareholder's shares on 30 days notice. The shareholderreceiving the offer has 30 days in which to agree to the sale, or to make acounter-offer to acquire the original offeror's shares.
OurClient intends to offer to purchase all of X's holdings of the foreign issuerfor cash. The transaction will require HSR Act filings. I have previouslydiscussed with you that our Client's offer to acquire the outstanding 60%interest would receive cash tender offer treatment, even though there is onlyone other shareholder and the offer will be made directly to that shareholderpursuant to an agreement. Thus, our Client intends to make its HSR filings andgive appropriate notice to X (as the ultimate parent of the foreign issuer) ofits need to make its own filing within ten days thereafter. We expect that Xmay well be uncooperative.
OurClient will obtain financing from an investment bank ("Bank").Simultaneously with the Client's anticipated acquisition of the 60% of the foreignissuer that it does not already own, Client will transfer 100% of the stock ofthe foreign issuer to a corporate Holdco in which the Client and Bank each havea 50% interest (that transaction will be reportable).
Thusimmediately following completion of the cash tender offer acquisition, Bankwill hold 50% of the stock of the foreign issuer, and our client will hold theother 50% (each through Holdco).
Assumethat all size-of-person tests are met or are inapplicable because of the sizeof the transaction.
1. Since Bank is not itself making a cash tender offerto the 60% holder, we have assumed that Bank's acquisition of the 50% interestwill require a 30-day waiting period. (Please let me know if Bank could getcash tender offer treatment here.)
2. Because Bank will acquire its 50% interestsimultaneously with the closing of the Client's cash tender offer purchase, webelieve the acquired person for the Bank's acquisition of its 50% interest willbe our Client (rather than X).
3. Because of the simultaneous acquisition of Bank's 50%interest at the closing of the tender offer acquisition, we believe thatfilings fees for the Client would be based on its holding 50% of the foreignissuer's stock (not 100%). Of course, Bank will also pay its own separatefiling fee for its acquisition of the other 50%.
Pleaselet me know whether you agree with this analysis or have any questions orcomments on it. Thanks.