Question
From:
Sidorov, Jack [Jack.Sidorov@usdoj.gov]
Sent:
Thursday, December 23, 2010 11 :16 AM
To:
Verne, B. Michael
Subject:
RE: idea for needle/haystack
Attachments: _1223111024_001.pdf
Here is the 1986 letter.
Also, Rich just filled me in on aconversation he just had with Pam Nardolilli at FRB, one of his prized contactsover there who is also their Change in Control expert. Where the target bank ispublicly held (as is the case with the transactions currently at issue), anyoneplanning to go over 10% MUST make a filing with FRB under the Change in ControlAct, and every such filing results in order (letter) being issued by FRB.Between 10 and 24.99%, the filing may be in the nature of a rebuttal ofcontrol, in which the case the FRB order letter would address that.
If the FRB's order letter concluded thatcontrol was rebutted, and the acquirer later wanted to go over 25%, it wouldhave to file for approval under either the Change in Control Act or the
Bank Holding Company Act, triggeringadditional notice to us.
If we are comfortable that thissituation involves an "acquisition which requires agency approval"under the Change in Bank Control Act, then the HSR exemption is met. We thinkthat since the acquirer MUST file and get approval, it does.
From: Verne, B. Michael[mailto:MVERNE@ftc.gov]
Sent: Thursday, December 23, 2010 10:59 AM
To: Sidorov, Jack Subject:
RE: idea for needle/haystack
Yes -please
From: Sidorov, Jack [mailto:Jack.Sidorov@usdoj.gov]
Sent: Thursday, December 23, 2010 10:21 AM
To: Verne, B. Michael Subject:
RE: idea for needle/haystack
Thanks. I just spoke to Dana -he has norecollection of the question. Said he turned over everything he had to someonein PNO for archiving when he left PNO, but it sounds like this vanished.
I do have the incoming letter from (Redacted)and can fax or scan/email it to you if you like.
September 15, 1986
BY HAND DELIVERY
Dana Abrahamsen, Attorney
Federal Trade Commission
Washington, D.C. 20580
RE: AVAILABILITY OFEXEMPTION FROM THE j HART-SCOTT-RODINO ANTI RUST IMPROVEMENTS ACT OF 1976CONTAINED IN 16 .F.R. SECTION S02IS(b)(1)
Dear Mr. Abrahamsen:
Thisletter is intend follow up on our recent conversations concerning theavailability in the circumstances we discussed, of the exemption from therequirements of the Hart-Scott Rodino Antitrust I Improvements Act of 1976,(the "Act") set forth in 16 C.F.R. Section 802.8(b)(1).
I
16 C.F.R.Section 802 8(b)(1) provides an exemption from the requirement of the Act asfollows:
A merger, consolidation, purchase ofassets, or acquisition which requires agency approval under 12 U.S.C. Section173 (q) shall be exempt from the requirements of the Act if copies of allinformation and documentary materials filed with any such agency arecontemporaneously filed with the Federal Trade Commission and the AssistantAttorney General at least 30 days prior to the consummation of the proposedacquisition.
Ourclient desires to 'increase its approximately 8.6% holdings in a savings andloan association (the "Association") subject to regulation by theFederal Home Loan Bank Board from its current holdings to an amount between 10%and 24.9% of the out standing shares of the Association. Since the Associationis state chartered, it was also necessary to obtain approval of the relevantstate savings and loan department and that approval has been obtained.
Acquisition of more than 10% of the outstanding shares of the Associationrequires what the Act and 16 C.F.R. Section 802.8(b)(1) refer to as"agency approval" under 12 U.S.C. Section 1730(q) (the "ControlAct").
TheControl Act is most frequently complied with by the filing of a notice of prposed change of control. The Control Act provides that once the notice issubstantially complete, the FHLBB has 60 days to "disapprove" thetransaction. Failing action by the FHLBB within the 60 day period, the personfiling the notice may proceed to acquire shares in excess of 10%.
It isimportant to note that the Control Act does not therefore actually provide forany "agency approval" as that term is used in the Act and applicableregulations.
Nonetheless, it is clear from 16 C.F.R. Section 802.8(b)(1), acquisitionspursuant to a notice cleared under the Control Act are sufficient to constitute"agency approval" to permit the exempt on under 12 C.F.R. Section802.8(b)(1). It is therefore clear that the words "agency approval"are to be read broadly and is not to be limited to an affirmative act or formalaction by the relevant agency.
There isan alternative method of obtaining FHLBB clearance under the Control Act toacquire more than 10%, but less than 25%, of the stock of a savings and loanassociation. Rather than filing a notice of proposed acquisition, thisprocedure referred to herein as the "rebuttal procedure," requiresthe filing of a statement to the effect that the person proposing to acquireadditional shares does not in end to exercise control over the subjectassociation. This rebuttal statement (the "Rebuttal Statement") mustbe a companied by a detailed rebuttal agreement ("RebuttalAgreement"), which must be executed by the prospect1ve acquiror. Attachedis a copy of a form of Rebuttal Agreement prepared by the FHLBB.
Theapproval of the FHLBB to the rebuttal procedure is necessary in order to permitthe acquiror to proceed with the proposed acquisition in excess of 10%. Thisapproval is evidenced by the
Therebuttal procedure is an integral part of the Control Act and the regulationspromulgated by the FHLBB thereunder. The Rebuttal Agreement was developed inearly 1986 by the FHLBB staff and authorized by 12 C.F.R. Section 574.4(e).C.F.R. Section 574.4(e) was adopted on November 26, 1985 as part of a Icomprehensive overhaul of certain regulations of the Federal Savings and LoanInsurance Corporation by Resolution No. 85-1005 of the FLBB. These regulationsbecame effective on December 26, 1985. The purpose of such regulations is toimplement the provisions of the Control Act and the Savings and Loan HoldingCompany Act, 12 U.S.C. Section 1730a (the "Holding Company Act')' See 12C.F.R. Section 574.1. The Rebuttal Agreement is authorized by and incorporatesspecific provision*s of the federal regulations found at 12 C.F.R. Section574.4(e).
Thepurpose of this letter is to seek an informal interpretation which wouldconfirm our view that the exemption set forth in 16 C.F.R. Section 802.8(b)(1)would apply to acquisitions made pursuant to the rebuttal procedure.
If theexemption is available, the Rebuttal Statement and Rebuttal Agreement and anyother related documents would be contemporaneously filed with The Federal TradeCommission and the Assistant Attorney General's Office 30 days prior to anyacquisition of the Association shares in excess of 10% in order to perfect theexemption.
Inapproving the Rebuttal Agreement and its related procedures, the FHLBB maypossibly not give substantial consideration to the question of the monopolisticor anticompetitive effects of the proposed acquisition, because the very natureof the Rebuttal Agreement is to ensure that the acquiror obtains none of theindicia of control of the Association and is therefore incapable of causing anysuch effects. The acquiror is limited to playing the role of a passiveinvestor.
Wetherefore believe that approval by the FHLBB of the rebuttal procedure has theeffect of agency approval of acquisitions made p procedure by the relevantagency within the meaning of the Act and 16 C.F.R. Section 802.8(b)(1).
Theapproval of the state department of savings and loan referred to earlier inthis letter provides that our client's acquisition of more than 10% but lessthan 24.9% of the Association must b completed by the last week of November,1986. While our client may seek an extension, it is by no means certain thatsuch an extension would be granted. Thus, it is a matter of urgency for ourclient to determine whether, in the event it were to proceed under the rebuttalprocedure, its acquisitions would be eligible for the Section 802.8(b)(1)exemption. For this reason, we would appreciate Buy and all expedition you canmuster in getting back to us. To that end, I have included two additionalcopies of this letter and its attachments for distribution to thee appropriatepersons in your office and in the Assistant Attorney General's Office for theirinput, as you suggested.
Pleasecall me at your earliest opportunity if you have any questions or comments onthe foregoing, or if you are of the view that additional submissions ormaterials would be required. Thank you for your past courtesy and yourcontinued consideration of this matter.