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Date
Rule
801.2(d)
Staff
Michael Verne
Response/Comments
You are mixing the size-of-person test with the size-of-transaction test. A or B must have $119.6 MM in either sales or assets and the other must have $12.0 MM in either sales or assets. If both of these are satisfied, the size of person test is met. The next test is to determine the fair market value of 100% of the voting securities of both A and B. The greater of these two values is the size-of-transaction. If this value exceeds $59.8 MM, the consolidation is reportable. Both A and B would file as both acquiring and acquired, but there is only one filing fee required (based on the higher fair market value of either A or B's voting securities.

Question

From:(redacted)

Sent:Monday, March 12, 2007 11:47 PM

To:Verne, B. Michael

Subject:Rule 801.2(d)(2)(iii) Question

Mr.Verne:

We'reworking on a reportability analysis and are wondering if you could provideguidance on the following size-of-the-transaction question:

Aand B are consolidating to become wholly owned subsidiaries of a newly formedcorporation. Under Rule 801.2(d)(2)(iii), each party will be deemed both anacquiring and an acquired party. As I interpret the rule, there are thus twopotentially reportable transactions: (i) A acquires B and (ii) B acquires A.The question is whether the sizes of A and B are aggregated for purposes ofvaluing the transaction. I assume not, but would like confirmation.

Forexample if A's total assets or total net sales is $7m and B's is $53M, then Iinterpret the rule to yield two nonreportable transactions: A acquires B with atransaction size of $53M, and B acquires A with a transaction size of $7M.

Butif the two valuations are aggregated, the total transaction size would be $60Mand reportable. Can you provide guidance on the correct reading of this rule? Ihaven't found a written interpretation or example anywhere. Many thanks.

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