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Date
Rule
7A(c)(10)
Staff
Patrick Sharpe
Response/Comments
Called (redacted) and informed him that this is exempt under C-10 - This is exempt under C-10 See #38 new Premerger Practice Manual. JS concurs. Superimposing a holding company over an operating co with the shareholders of the operating company exchanging their shares for Holdco shares is exempt. This assume the issue of no other shares by Holdco at that time and that the shares are exchanged in the same percentage held prior to the exchange. [note 1-agreed see #38 new PMPM]

Question

August 30, 1991

 

Patrick Sharpe

Premerger Notification Office

Federal Trade Commission

6th and Pennsylvania Avenue, NW

Room 303

Washington, D.C. 20580

 

Re: Confirmation of Informal Interpretation of the

Hart-Scott Rodino Antitrust

Improvements Act of 1976

 

Dear Patrick:

This will confirm our several telephone conversations in the last two days with (redacted) regarding the reporting requirements when a service-providing corporation, which we will call SERVCO, forms a holding company,

DESCRIPTION OF TRANSACTION: SERVCO has been engaged in business for several years and has total assets and annual revenues greater than $10 million but less than $100 million. SERVCO has formed a new Delaware holding company, HOLDCO, and a wholly-owned subsidiary of HOLDCO hat we will call SHELL. The incorporator of HOLDCO has caused HOLDCO and (redacted) to enter an agreement with SERVCO pursuant to which there will be a reverse triangular merger of SHELL with and into SERVCO and each SERVCO shareholder will receive one share of HOLDCO for each share presently held in SERVCO.

APPLICATION OF THE ACT: (redacted) agreed that this is nota reportable transaction. Staff considers such a transaction within the Acts Exemption (c) (10. (This was discussed in Interpretation 144 of the ABA Premerger Notification Practice Manual [1985 edition] and will be dealt with more clearly in the 1991 edition.) Also, it fails the size of person test: the putative acquiring person HOLDCO has less than $10 million in assets and liabilities, and no person controls HOLDCO. Finally, SERVCOs formation and capitalization of HOLDCO was not subject to 16 C.F.R. 801.40 because the holding company was formed in connection with a merger.

This treatment under the Acct is consistent with economic reality. The formation of the holding company and the exchange of its shares for former holdings in the operating company SERVCO is of no competitive significance and results in the equivalent of a reincorporation in Delaware.

We appreciate the Premerger Offices help in clarifying the application of the Act to this transaction. If I have made any erroneous statements above, I would appreciate your calling me immediately either on our direct D.C. line (redacted) or at the (redacted) number above.

Sincerely yours,

(redacted)

(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.

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