Question
From: (redacted)
Sent: Tuesday, June 12, 2007 5:52 PM
To: Verne, B.Michael
Cc: (redacted)
Subject: Request forClarification - Applicability of HSR Act
Dear Mike,
I am writing toseek your advice about the following transaction:
Immediately prior to the relevantsteps of the proposed transaction, the common stock of Company A will be heldas follows: X, Y and Z will own, respectively, approximately 73%, 26% and 1% ofthe common stock of Company A.
1.X,Y and Z will contribute all of their shares of Company A to a newly-formedcorporation (Newco) in exchange for a combination of notes, preferred stock,voting shares and non-voting shares of Newco. The various securities of Newcowill not be issued to X, Y and Z on a pro-rata basis but, after this step, Xwill control Newco, which in turn will own 100% of Company A. Y will receivenotes and non-voting stock of Newco and Z will receive only notes of Newco.
2. Newco will then merge with Company Aand the shares of Newco will be exchanged for identical shares of the survivingentity except that Y will receive a voting preferred share of the survivingentity in exchange for its common stock of Newco.
3.Afterthe preclosing steps outlined above, Q will acquire a minority interest of approximately49% of the surviving entity with the result that none of X, Y, Z or Q willcontrol the surviving entity for HSR purposes. We are separately consideringthe HSR implications of Q's acquisitions of shares of the surviving entity.
My specific questionsare as follows:
1.Isthe formation of Newco subject to 801.40 (even though it is in connection witha merger)?
2.Ifthe formation of Newco is analyzed under 801.40, and the majority interest inCompany A that is contributed by X can be excluded as to X under 802.30(c), isX's acquisition of voting securities of Newco exempt under 802.4 because theonly remaining asset of Newco is a minority interest in Company A which can bedisregarded when applying 802.4? X will continue to control the survivingentity after the merger, until step 3 above.
(redacted)