Question
By Email
Michael B. Verne
Federal Trade Commission
Premerger Notification Office
Bureau of Competition
600 Pennsylvania Avenue, N.W. Room 303
Washington, D.C. 20580
Re: HypotheticalTransaction
Dear Mike:
Iam writing to confirm the substance of our telephone conversation on Friday,March 6, 2009, concerning identifying the filing party under theHart-Scott-Rodino Act ("HSR Act") for a potentially reportabletransaction. As you will recall, given the facts of the proposed transaction,you agreed that the "acquiring person" is the entity that will holdthe acquired person after consummation of the transaction, and not theacquiring entity's current majority shareholder.
Werepresent Company A which will acquire, through a stock purchase, Company B, aclosely-held corporation. As a result of the acquisition, Company B will becomea wholly owned subsidiary of Company A.
Inconsideration for the acquisition, Company B shareholders will receive newly-issuedvoting securities in Company A, as well as a cash payment. Company Bshareholders will hold approximately 20% of Company A's outstanding votingsecurities after consummation of the transaction.
Currently,Company A is controlled by a single shareholder ("Shareholder C")that beneficially owns approximately 55% of Company A's outstanding votingsecurities. After consummation of the acquisition, the issuance of new CompanyA securities will dilute Shareholder C's stake in Company A to approximately40%. As a result, Shareholder C no longer will control Company A.
Rule801.2 states that the acquiring person in a transaction is "[a]ny personwhich, as a result of an acquisition, will hold voting securities or assets,either directly or indirectly. " An acquiring person holds, pursuant toRule 801.1(c)(8), "all assets and voting securities held by the entitieswhich it controls directly or indirectly:' Because Shareholder C will notcontrol Company A after the transaction is consummated, it never will "hold"the securities of Company B. Accordingly, Shareholder C is not the"acquiring person" within the HSR Act. Rather, Company A is theacquiring person in the proposed transaction --and the reporting person ifnotification under the HSR Act is required --notwithstanding Shareholder C'scontrol of Company A prior to consummation of the transaction.