Question
From:
(Redacted)
Sent:
Thursday, October 14, 2010 6:18 PM
To:
Verne, B. Michael
Cc:
(Redacted)
Subject: HSRHypothetical Regarding Basis for Non-reportability
Dear Mike,
I am writing toconfirm that the proposed transaction described below is not reportable underthe Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSRAct").
ProposedTransaction
Under a proposedtransaction involving a merger, the Buyer will acquire 100% of the shares ofTarget, a privately held corporation. The shares of Target consist of classesof voting securities (carrying voting rights with respect to the election ofdirectors) and classes of nonvoting securities (carrying no such rights). Theholders of the voting securities also hold nonvoting securities.
The overallpayment that Buyer is making for 100% of the issued and outstanding shares ofthe Target is greater than $63.4 million (the amount that must be exceeded tomeet the HSR Act Size of the Transaction Test). However, most of the totalpayment will be made for the non-voting securities in Target, and the part ofthe consideration payable for Target's voting securities will be an amount wellbelow $63.4 million. There also is consideration being paid for outstandingoptions and warrants. These options and warrants do not carry voting rights andare not convertible into voting securities.
The proposedtransaction and distribution of consideration between voting and non-votingsecurities have not been structured for purposes related to potentialobligations under the HSR Act. Please assume for purposes of this hypotheticalthat the Size of the Parties Test is met, and that if the Size of theTransaction Test were met that this transaction would be reportable under theHSR Act.
Analysis andConclusions
Our conclusion isthat the proposed transaction described above is not reportable under the HSRAct, because the $63.4 million Size of the Transaction Test has not been met.
Our understandingis that any consideration for non-voting securities is not included in the HSRvaluation, because the acquisition of non-voting securities is HSR exemptregardless of value.
We also understandthat the HSR analysis is not impacted by the fact that the majority of thetransaction consideration (in excess of $63.4 million) will be paid to thepersons that hold the voting securities of Target by virtue of the fact thatthey hold as well non-voting securities of Target.
In addition, weunderstand that any consideration for options and warrants, that do not carryvoting rights and that are not convertible into voting securities, would not beincluded in the valuation for HSR purposes.
We furtherunderstand that this transaction will not be regarded as a transaction ordevice for avoidance under 16 C.F.R. 801.90.