01/07/2010 I would look at the steps sequentially and analyze which are reportable. 1) non-reportable -B already controls LLC so its increase from 51 % to 64% is exempted by 802.30. A does not control LLC, so it does not have a filing as an acquiring person for the new assets B is contributing to LLC. 2) non-reportable -the earlier contribution of assets is not considered when the LLC is converted to a corporation. Since both A and B are receiving voting securities pro rata to the interests they hold in the LLC, this step is exempt under 802.10. 3) Agree -A has a filing in its acquisition of voting securities of the new corporation. B may also have a reportable acquisition if the assets contributed by A are valued at more than $50 million (as adjusted), since it controls the corporation prior to the contribution of the assets.
Question
From:
(Redacted)
Sent:
Wednesday, January 06, 2010 5:37 PM
To:
Verne, B. Michael
Subject: HSR Question
Mike, First, happy new year!
Second, I've been puling over a fact pattern that I need your advice about. Here it is: A has a 49% membership interest in an existing LLC, in which B has a 51% interest. A and 8 want to contribute additional assets to the LLC and, In the process, convert it from an LLC to a corporation. For lax reasons, the events are sequenced as follows:
(1) B contributes additional assets and increases Its membership interests from 51% to 64%.
(2) The LLC is converted to a corporation; A receives 36% of the voting securities and B receives 64% of the voting securities. A's 36% of the slack is worth less than $50 million (as adjusted) and B's 64% is worth more than $50 million (as adjusted).
(3) A contributes additional assets and receives additional voting securities so that each of A and B has 50% of the new corporation. The value of the new corporation is high enough that 50% of the voting securities are worth more than $50 million (as adjusted).
It seems to me that step (3) requires a filing by A in that A will acquire voting securities worth more than $50 million (as adjusted) and the transaction Is not exempt under 802.10.
What I'm not sure about is whether in step (2) B is required to file when it acquires 64% of the voting securities of the converted LLC. II seems to me ought to be exempt under 802.30 or perhaps 802.10, but Example 3 to 802.10 suggests it may not be. What do you think?