Question
From: (Redacted)
Sent: Thursday, September 17, 2009 12:44 PM
To: Verne, B. Michael
Subject: Query reRestructuring and IPO
Hi Mike,
A client intendsto undertake an internal reorganization as part of a planned initial publicoffering. At present, its operations are held through two limited partnerships,LP1 and LP2. LP1 has three direct subsidiaries, Holdco 1, Holdco 2, and Holdco3; LP2 has one direct subsidiary, Holdco 4.
Each of thepartners in LP1 is also a partner in LP2, except for a few partners of LP1 thathold their interests directly in Holdco 4 (LP2's subsidiary) rather than in LP2itself. Consequently, partners of LP1 that are also partners of LP2 hold aslightly greater interest of LP2 than they hold in LP1. We refer to thepartners of LP1 that are also Holdco 4 shareholders as the "Holdco 4 Investors."Together, the partners of LP2 and the Holdco 4 Investors represent all of thepartners of LP1, and we refer to them collectively as the"Investors."
The purpose of therestructuring is to transfer direct ownership of the Holdcos to a newly formedentity ("Floatco"), whose shares will be sold in the public offering.We believe that the proposed restructuring is exempt pursuant to 7A(c)(10) ofthe Act.
All of the stepswill take place on the same day (i.e., the day of Floatco's public offering).The pertinent steps of the restructuring are outlined below.
1. LP1 isliquidated, and its interests in Holdcos 1, 2, and 3 are distributed to thepartners of LP1 in the same proportion to their economic interests in LP1. LP2is also liquidated and its interests in Holdco 4 are distributed to thepartners of LP2 in the same proportion to their economic interests in LP2. (TheHoldco 4 Investors retain their ownership interest in Holdco 4.) Following thisstep, each Investor will hold a direct interest in each of the 4 Holdcos andcollectively, the Investors will hold 100% of the outstanding voting securitiesof the Holdcos.
We believe thatthis step of the restructuring is exempt from notification under Section7A(c)(10) of the Act, which exempts the acquisition of voting securities if, asa result of the acquisition, the voting securities acquired do not increase,directly or indirectly, the acquiring person's percentage share of the votingsecurities of the issuer. This exemption has been applied to the spin-off of asubsidiary to the shareholders of its parent. See ABA PremergerNotification Practice Manual, 4th Ed., Int. 19.
2. The Investorsexchange all of their shares in the four Holdcos for cash and possibly sharesof Floatco and Floatco undertakes a public offering of Floatco shares. For abrief moment in time immediately prior to the IPO -it is theoretically possiblethat one or more of the Investors will hold a percentage interest in Floatcothat is greater than its interest in a given Holdco following Step 1. However,post-IPO, no Investor will hold an interest in Floatco greater than itsinterest in any Holdco following Step 1. Moreover, none of the partners of LP1or LP2 will hold an interest in Floatco greater than its pre-restructuringinterest in LP1 or LP2. Accordingly, we believe that this step is also exemptpursuant to 7A(c)(10) of the Act.
I would begrateful if you could please confirm that you agree with our analysis that nofiling is required. I am happy to discuss any questions you may have at yourconvenience.