Question
From:(redacted)
Sent:Tuesday, August 15, 2006 3:53 PM
To:Ovuka, Nancy M.
Cc:(redacted)
Subject: HSR 16 CFR section 802.4 Exemption
HiNancy.
I hope you are doing well.
Iam writing to confirm my understanding of the advice you provided to me on thetelephone yesterday concerning application of the 16 C.F.R. section 802.4 exemption to a transaction. Specifically, wediscussed the following transaction.
The Facts
Company A ("A") is planning to purchaseCompany B ("B") in exchange for well over $1 billion. The necessaryHSR filings have already been made by Company A and Company B and theapplicable HSR waiting period expired or was terminated less than 12 monthsago.
CompanyX ("X") would like to participate in A's upcoming acquisition of B.To facilitate X's investment, A is planning to form two newcos -- US Newco andForeign Newco. US Newco will purchase the US business of B and Foreign Newcowill purchase the foreign business of B. X will invest $500 million to acquireapproximately 20% of US Newco and $400 million to acquire approximately 20% ofForeign Newco. US Newco and Foreign Newco will then collectively acquire B.
The HSR Analysis
Based on our discussionyesterday, I understand that X's acquisition of 20% of US Newco and X'sacquisition of 20% of Foreign Newco would both be exempt from HSR filingrequirements under 16 CFR section 802.4 because X would acquire such interests as part of the formation of USNewco and Foreign Newco and the only assets of US Newco and Foreign Newco atthe time of their formations would be cash -- an exempt asset under 16 C.F.R. section 801.21. I understand that so long as the money X contributesto acquire 20% interests in US Newco and Foreign Newco is used to acquire B,the exemption would apply to X's acquisition of 20% interests in US Newco andForeign Newco. This would be true regardless of whether US Newco and ForeignNewco technically transfer the cash to B's interest holders in exchange for Bor whether the ultimate parent entity of US Newco and Foreign Newco -- A --aggregates the cash contributed by X with other sources of cash and uses suchto acquire B. It would also be true regardless of whether X's acquisition ofinterests in US Newco and Foreign Newco occurs a few days before US Newco andForeign Newco acquire B, or just minutes or seconds before such acquisition.Finally, it would also be true even if X borrows the cash that it will use toacquire 20% interests in US Newco and Foreign Newco from a third party lenderwho requires that the collateral for such loan consists of interests in theentities that will acquire and hold B.
Nancy, please confirm that my understandings about theapplication of the 802.4 exemption to the facts described above are accurate.