Skip to main content
Date
Rule
802.20; 801.1(f)
Staff
Patrick Sharpe
Response/Comments
Comment: The initial transaction is exempt (32% of v/s) under Section 802.20. The option is reported if and when it is exercised. Although it is one part ofBeneficial ownership, that is the right to vote the shares, the acquisition of anoption with the power to vote a majority of the shares is not reportable because Xwill not hold the v/s/ of Y. This transaction is neither the acquisition of a v/s noran asset. called Mr. (redacted) 4-12-85 and informed him that under this scenariothe acquisition is exempt und 802.20b. Concerned disagreed J.S. AS D.A. VS S.T. VC Upon later review, our office position at present is that an option or warrant coupled with the present right to vote is equivalent to holding a voting security. WEK 3/18/87 See 8504007 confirmation letter

Question

(redacted)

April 10, 1985

BY FEDERAL EXPRESS

Federal Trade Commission
Premerger Notification Office
Bureau of Competition, room 301
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580

Attention: Mr. Patrick Sharpe, Compliance Specialist

Gentlemen:

Further to our telephone conversation on April 9, 1985, with your Mr. Patrick Sharpe, we write to request an interpretation as to whether the reporting requirements imposed by the Hart6-Scott-Rodino Antitrust Improvements Act of 1976 (the Act) apply to the following transaction:

Company X intends to acquire 32% of the issued and outstanding voting securities of company Y for $6.5 million.* company Xs purchase of such securities is contingent upon company Xs receiving (1) an option to purchase additional shares of the voting securities of company Y which option, when exercised, would result in Company X holding a total of 51% of Company Ys issued and outstanding voting securities, and (2) prior to company Xs exercise of such option, irrevocable proxies or similar rights to vote the shares which are the subject of the option. Assume for purposes of this hypothetical that Companies X and Y satisfy the commerce and size-of-the-parties tests of Sections 7A(a)91) and 7A(a)(2) of the Act and that company Y has annual net sales or total assets of $15** million or more.

Staff Comments: * Note: $6.5 mm for entire package of 32% v/s plus options and proxies to vote. ** I called (redacted) and he indicated this should be ---- $25.

Please confirm that, in accordance with Rule 802.20(b) promulgated pursuant to the Act, Companies X and Y would be exempt from the Acts reporting requirements until such time as company X exercises its option to purchase the additional shares of company Y which would confer ownership of 51% of the voting securities of Company Y upon company X. We are particularly interested in the Premerger Office staffs views regarding the fact that, at the time Company X acquires the initial 32% interest in Company Y, Company X acquires irrevocable proxies to vote the shares subject to the option.

If you have any questions regarding the foregoing hypothetical, please do not hesitate to contact us.

Very truly yours,

By (redacted)

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

Learn more about Informal Interpretations.

Return to top