Question
From: (Redacted)
Sent: Monday, November 01, 2010 6:32 PM
To: Verne, B. Michael
Subject: Question
Mike -I hope all is well with you.
I have concluded that a transaction thatI have been reviewing is not reportable and I would appreciate your view. Ihave outlined the facts and my thoughts below:
There is a consortium of parties each ofwhom has an interest in a production facility in Canada.
Each consortium member's interest in thefacility and its operations is comprised of two inter-related components: ashareholding interest in a corporation that manages and operates the productionfacility on behalf of consortium members; and a corresponding undividedownership interest in the production facility itself (the shareholding andundivided ownership interests are collectively referred to in the consortiumagreement as a member's "Interest"). Each consortium member has theright to send raw materials to be processed at the facility on its behalf; oncethe materials have been processed, finished goods are returned to the member.
Given the above structure, anacquisition of any Interest necessarily involves both the acquisition of ashareholding interest and the acquisition of the corresponding undividedownership interest.
The proposed acquisition involves theacquisition by one of the existing consortium members, A, of a portion of theInterest of another consortium member. A's Interest, post-acquisition, would bein the range of 10%-15%.
I believe the acquisition of the undividedownership interest in the facility should be viewed as an acquisition ofinterests in an unincorporated entity, and, since A will not acquire control ofthe entity, the acquisition would not trigger HSR reporting. However, even ifA's acquisition were treated as the acquisition of assets, I believe it wouldbe an exempt transaction under Section 802.50 because the assets are located in Canada and all revenues are generated in Canada.
Finally, if the acquisition of theundivided interest in the facility is exempt from HSR reporting, theacquisition of the shareholding interest will not be reportable because Section802.50 will exempt it as well (in addition, it is likely that the value of theshares that will be held by A as a result of the transaction will be below the$63.4 million threshold).
Thank you for your assistance. If youhave any questions, please let me know.