Question
From: (redacted)
Sent: Monday, October 06, 2008 6:11 PM
To: Verne, B. Michael
Subject: Size ofperson/801.11 (e)/open market purchases
Mike,
I have a clientwho is concerned that his company is the target of a hostile takeover. Thebuyer appears to be a newly formed shell that is its own UPE (Newco), and doesnot have a regularly prepared balance sheet. Assume that is true, and thatNewco has less than $10 million in assets and revenue (all references in thise-mail to "as adjusted" thresholds). I assume that Newco can go intothe open market in one or a series of transactions and acquire up to $200million in voting securities, since that will be below the 7A(a)(2)(B)threshold for size of person, and any cash or shares of target held by Newco donot count toward size of person under 801.11 (e). However, if each open marketpurchase is a separate acquisition under 801.11 (e), Newco may have to countcash it holds toward the size of person if it is not cash held for the specificnext open market acquisition being assessed. Assuming you agree with the aboveprior to the prior sentence, do you also agree as to how the cash held must beassessed?
If my aboveassumption is correct (Newco can purchase up to $200 million without filing),does the answer change if Newco: (a) has an intent to acquire control oftarget; (b) has expressed that intent to target through a "bear hug"letter; or (c) has sent target an HSR notice letter and filed HSR for atransaction to acquire control valued at over $200 million? Scenario (c) seemsto raise the most questions, because it implies that Newco can take advantageof size of person and purchase up to $200 million of target shares in the HSRwaiting period even though it will not qualify for size of person based on thelarger transaction in its HSR filing. However, conceptually, I do not thinkthat the situation in (c) is that different than the situations in (a) or (b).