Question
From:
(Redacted)
Sent:
Monday, April 19, 2010 9:37 PM
To:
Verne, B. Michael
Subject: HSR Question
Mike,
I am writing to confirm my understandingof our telephone conversation of earlier today and to raise an additional questionconcerning the situation described below.
FACTS:
Acquiring Person A launched a cashtender offer ("Offer") to purchase up to a specified number of votingsecurities of Company C. Company C is incorporated in Canada and has principal offices in the U.S. and Canada. Person A subsequently amended the tenderoffer to acquire up to 100% of Company C's shares at the same price. Person Athen filed HSR for acquisition of control of Company C and received earlytermination.
Person A then amended its tender offeragain, making several changes, including increasing the offer price andassigning the right to purchase certain shares of Company C to two entities asfollows:
(i)To an acquisition vehicle indirectly controlled by Person A -the right topurchase Company C shares validly deposited and not withdrawn under the Offer;and
(ii)To a specified natural person (who is a Canadian citizen), in his capacity assole trustee of a Trust T -the right to purchase those Company C shares validlydeposited and not withdrawn under the Offer which, if otherwise taken up byPerson A, would result in Company C becoming a non-Canadian controlled entityunder the Investment Canada Act upon consummation of the Offer. Person A willprovide the trustee with the funds necessary to acquire its portion of theCompany C shares deposited under the Offer by way of a loan. The trustee willhold the Company C shares it purchases for the benefit of Trust T and will havelegal title to such Company C shares. The trustee will be entitled to vote theCompany C shares acquired in whatever manner he wishes in the best interests ofthe beneficiary of Trust T.
Person A intends to purchase the sharesacquired by Trust T at such time as doing so would not result in Company C (ora subsidiary) becoming "non-Canadian" within the meaning of theInvestment Canada Act.
QUESTION:
In view of (ii) above, which entity isdeemed to hold the Company C shares purchased by the trustee? For example, isit the trustee, Trust T itself, or the settlor of Trust T?
For purposes of the following HSRanalysis, I will refer to this entity as the "Trust Entity."
HSR ANALYSIS:
You stated that, pursuant to 802.23,Person A need not file another HSR. However, if the Trust Entity is notcontrolled by Person A but rather is part of a separate Acquiring Person, then802.23 does not apply to exempt the Trust Entity, and the Trust Entity wouldneed to make a separate HSR filing for acquisition of Company C shares if thestatutory HSR thresholds in 15 U.S.C. 18a(a)(2) are exceeded. Thedetermination of who "controls" the Trust Entity turns on theappropriate definition in 801.1 (b).
You also stated that since Company C hasprincipal offices in the U.S., it is a U.S. issuer even though it also hasprincipal offices outside the U.S., so the exemption in 802.51 would not apply.Further, assuming that Company C holds U.S. assets valued at more than $63.4million, the Trust Entity would not be able to rely on 802.4 to exempt it fromthe obligation to file HSR.