Question
January 29, 2007
Mr. B.Michael Verne
PremergerNotification Office
Bureauof Competition
FederalTrade Commission
7th& Pennsylvania Avenue, NW
Washington, DC 20580
Dear Mike:
I amwriting to confirm my understanding of telephone conversations we had on January 22, 2007and January 26, 2007 concerning obligations under the Hart-Scott-RodinoAntitrust Improvements Act of 1976, as amended ("HSR Act").
Thereis a proposed merger between two publicly trade companies, Company A andCompany B. whereby Company A will be the surviving corporation. The underlyingmerger is reportable under the HSR Act for Company A's acquisition of all ofthe voting securities of Company B. Please assume that both Company A andCompany B have complied with or will comply with the HSR Act for that acquisitionby Company A.
Pursuantto the merger between Company A and Company B, the shareholders of Company Bwill receive voting securities of Company A as consideration for the merger. Pleaseassume that some of the Company B shareholders will as a result of the mergerend up holding an amount of Company A voting securities valued above the HSRsize of the transaction test. Some or all of these shareholders may intend torely on some exemption from filing such as the investment only exemption under16 C.F.R. 802.9 or the institutional investor exemption under 16 C.F.R.802.64. It is also possible that some of these shareholders (such asinstitutional investors) that appear for SEC or other purposes to beneficiallyown enough shares of Company B that they would acquire from the merger CompanyA stock above the size threshold do not actually hold such amount of shares forHSR purposes. The list of shareholders that may hold Company A stock valuedabove the size of the transaction test as a result of the merger could changebetween now and closing. For example, the value of Company's A publicly tradedvoting securities may increase or decrease, a shareholder could acquire or sellvoting securities of Company B, and common shareholders of Company A and Bcould increase or decrease holdings of voting securities in either or bothcompanies prior to the closing of the merger.
You agreedthat Company A does not have an obligation under the HSR Act to notify anyCompany B shareholder that the shareholder may be acquiring a HSR reportableamount of Company A voting securities as a result of the merger or to seekconfirmation from any Company B shareholder that the shareholder is taking aposition that it does not have a reporting obligation. Accordingly, if aCompany B shareholder fails to file, but should have filed under the HSR Actfor acquiring Company A voting securities as a result of the merger --based onan incorrect reliance on an investment only exemption or other reason -- thiswould not result in any HSR violation by Company A, such as for not filing asan acquired person. In this context, my understanding is that Company's A HSRobligation to file as an acquired person will arise only when shareholders filefor a reportable acquisition of Company A voting securities.
Pleaselet me know as soon as possible if you disagree with any of the conclusionsdiscussed above, or if I have misunderstood any aspect of your advice. Thankyou for your assistance in this matter.