Question
February 20, 2008
Michael Verne
Premerger Notification
Office Bureau of Competition
Federal Trade Commission
7th & Pennsylvania Avenue, NW
Washington, DC 20580
Re: HSR Treatment of LLCInterests
Dear Mike:
In follow-up to our conversationon February 19, 2008, I am writing to confirm my understanding of theapplicability of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act") toa proposed transaction.
Pursuant to a proposedtransaction, Operating LLC, a limited liability company, will redeem interests held by Seller inOperating LLC. Seller has a minority interest in Operating LLC. Asa result of theredemption, Acquiring Person, an existing minority holder of limited liabilitycompany interests in Operating LLC, willhave its interest in Operating LLC increased such that it will obtain control of Operating LLC. In other words, as aresult of the redemption, Acquiring Person will hold a 50% or more interest inOperating LLC in terms of rights to profits or rights to assets upon dissolution. For purposesof this hypothetical, you can assume that Acquiring Person is instrumental in the redemption being made byOperating LLC. You also can assume that the size of the parties test andthe size of the transaction test are met for any acquisition by AcquiringPerson.
You confirmed that AcquiringPerson can acquire limited liability company interests in Operating Company,regardless of dollar value and whether before an HSR Act filing is made orwhile an HSR Act waiting period is pending, so long as it does not acquirecontrol of Operating Company before filing under the HSR Act and observing theapplicable waiting period. We specifically discussed the scenario where the redemptionmay be done pursuant to a series of options where Acquiring Person would not gain control ofOperating LLC until closing on the last in the series of options. You agreedthat there was no HSR obligation created prior to closing on the final option whether the options wereindependent of one another or conditioned upon all being exercised.
Please let me know as soon aspossible if you disagree with any of the conclusions discussed above, or if I havemisunderstood any aspect of your advice. Thank you for your assistance in thismatter.