Question
Patrick Sharpe
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580
Re: Nonreportability of Transaction Under HSR Act
Dear Patrick:
This letter will confirm our telephone conversation last week in which you indicated that the following transaction would not be reportable under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”), as codified at 15 U.S.C. § 18a and the rules promulgated thereunder:
Company A, which is its own ultimate parent entity for HSR Act purposes, is merging with Company B, which is also its own parent entity. 1 Company C, which is its own ultimate parent entity, currently owns approximately 46.5% of the common voting securities of Company A. As a result of the merger, Company C’s holdings of the voting securities of Company A would be approximately 24.6%. At the same closing as the merger (but, for a variety of business reasons, immediately following the merger), Company C will purchase from Company D, which is its own
ultimate parent entity, approximately 18% of the voting securities of Company A. The occurrence of the merger and stock purchase are conditioned upon each other occurring. After the transactions contemplated by the merger Agreement, Company C will hold 34.2% of the voting securities of Company A.
Company A and Company C filed HSR notifications in October 1994 for meeting or exceeding the 25% threshold, in contemplation of Company C, through open market stock purchases, increasing its holdings of Company A common voting securities from 46.5% up to, but not meeting or exceeding 50%. 2 Company C did not make these purchases, however.
As we discussed, even though Company C did not acquire any additional voting securities in connection with the October 1994 HSR notification following the termination of the pertinent HSR waiting period, given Company A’s ownership of 46.5% of Company A’s voting securities at such time, Company C automatically satisfied 16 C.F.R. § 802.21 [Note: agree] for purchases of up to, but not meeting or exceeding, 50% of Company A’s voting securities. Under 6 C.F.R. § 802.21 Company C has 5 years to complete the acquisition of voting securities up to, but not meeting or exceeding, the 50% threshold from the date upon which the HSR waiting period expired or terminated in connection with the October 1994 HSR notification. Accordingly, so long as Company C acquires the voting securities described above from company D, within such 5-year time period, no* [Note: *agree] HSR filing would be required for the transaction.
Please let me know immediately if I have misunderstood your analysis or your conclusions regarding the above described transaction. As always, I appreciate your very valuable assistance in these matters.
Best regards,
(redacted)
A HSR filing will be made by company A and Company B with respect to the merger.[Note: OK]
Company C had been Company A’s ultimate parent entity from its inception until theearly 1990's, when Company C arranged for an initial public offering (not legible) of Company A,which IPO decreased Company C’s holdings by Company A voting securities to the 46.5% level.