Question
Kate Walsh
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 303, 600 Pennsylvania Ave. N.W.
Washington, DC 20580
RE: Hart-Scott-Rodino("HSR") Compliance Inquiry
Dear Ms. Walsh:
This letter summarizes thetelephone conversation which we had earlier this afternoon regarding thepotential filing requirements for one of our clients under theHart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended (the"Act"), and the rules promulgated thereunder. Specifically, thisletter restates the various facts related to our client's potential acquisitionand the conclusions we reached regarding the treatment of such acquisitionunder the Act.
SUMMARY OF THE TRANSACTION
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), a subsidiary of our client (the "Purchaser")will purchase all of the issued and outstanding common stock of a U.S. corporation (the "Target").The Target's issued and outstanding common stock consists of (1) Class A voting common stock thatentitles its holders to vote for the directors of the Target, and, therefore,is a voting security within themeaning of 16 C.F.R. 801.1(0(1); and (2) Class C non-votingstock that does notentitle its holders to vote for the Target's directors and, accordingly, is nota voting security as defined by the Act. The Target's Class A voting securitiesconstitute 17.1% of the Target's issued and outstanding equity securities. The Class A votingsecurities are owned entirely by one individual (the "Principal Shareholder"). TheTarget's Class C non-voting securities constitute 82.9% of the Target's issuedand outstanding equity securities. The Principal Shareholder holdsapproximately 10% of the outstanding Class C non-voting securities. The remainderof the Class C securities are owned by various individuals and entities. Intotal, the Principal Shareholder holds approximately 25% of the Target's issuedand outstanding equity securities, and other individuals and entities holdapproximately 75% of the Target's issued and outstanding equity securities.
Upon the consummation of thetransaction contemplated in the Merger Agreement, the Purchaser will acquireall of the Target's issued and outstanding securities (voting and non-voting)for a total purchase price of approximately Sixty Million Dollars ($60,000,000)(the "Purchase Price"). The Merger Agreementprovides that the Purchase Price will be paid by the Purchaser to the Target'sstockholders (the "Stockholders") pro rata basedupon their respective percentage ownership of all of the Target's issued andoutstanding equity securities. Therefore, the Purchaser is paying approximatelyTen Million Two Hundred and Sixty Thousand Dollars ($10,260,000) to acquire allof Target's issued and outstanding Class A voting common stock, and is payingapproximately Forty-Nine Million Seven Hundred and Forty Thousand Dollars($49,740,000) to acquire all the Target's issued and outstanding Class Cnon-voting common stock.
ANALYSIS
Based upon our discussion of theabove cited facts, you confirmed that only the value of the Target's votingsecurities being acquired by the Purchaser will be counted for purposes of the"size of transaction" test set forth in Section7A(a)(2)(B)(i) of the Act. The value of the Target's non-voting securities isnot counted for purposes of determining if the "size of transaction"threshold is met or exceeded. Accordingly, the consideration being provided bythe Purchaser to the Stockholders pursuant to the Merger Agreement in consideration for allof the issued and outstanding Class A voting common stock, approximately Ten Million Dollars($10,000,000), constitutes the acquisition price for the "size oftransaction test." Therefore, the acquisition price of the transactioncontemplated in the Merger Agreement is less than the "size of transactionthreshold," currently Fifty Nine Million Eight Hundred Thousand Dollars($59,800,000), and the Act does not mandate an HSR filing.
I would appreciate it if youwould call or e-mail me at your earliest convenience to confirm this letter correctly represents our discussion and theadvice that you provided me earlier today. Thank you for your assistance in thismater.