Question
(redacted)
MEMORANDUM
VIA TELECOPY (202) 326-2624
TO:Mr. Dick Smith
FROM:(redacted)
RE:Analysis of Proposed Transaction under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended
DATE: June 26, 1998
______________________________________________________________________________
Thank you for confirming that the transaction described in the outline that we sent to you earlier today was not subject to the reporting requirements of the Hart-Scot-Rodino Antitrust Improvements Act of 1976, as amended. Your confirmation was based on the following additional facts:
1.None of Purchaser, Holdings or Parent have prepared and will not have prepared any financial statements prior to the acquisition of Target.
2.Upon issuance, the Capital Holdings Warrants and Income Holdings Warrants will not have any voting rights with respect to Holdings.
3.In accordance with 16 C.F.R. 801.11(e), we advised you that this calculation will yield a value of less than $10 million.
4.The transaction outline assumed that both Holdings and Parent were formed using the so called LLC partnership model, although we discussed that had either or both of Holdings or Parent been formed using the so-called LLC corporate model, your conclusion would not have changed since we advised you that: (a) no person or entity will hold fifty percent or more of the voting securities of Parent; (b) no person or entity will have the contractual right to appoint fifty percent or more of the board of directors/managers of Parent; and (c) no person or entity (other than Parent) will have the contractual right to appoint fifty percent or more of the board of directors/managers of Holdings.
* * *
As always, we thank you for your prompt assistance. If the foregoing does not reflect your understanding, please contact us. My direct number is (redacted).
cc: (redacted)
The Transaction
For purposes of this outline, assume that the size-of-transaction and $100 million element of the size-of-person tests** are met.
(**Staff comment: for Target)
1.Purchaser, a recently formed public limited company organized under the laws of England and Wales proposes to commence a tender offer pursuant to which Purchaser would seek to acquire all of the outstanding capital stock of Target, a public limited company incorporated and registered in England and Wales for cash in an amount exceeding $15 million (the Transaction). Target owns a wholly-owned United States subsidiary (U.S. Sub) that has annual net sales in excess of $25 million. Accordingly, for Hart-Scott-Rodino purposes, the acquisition of Target could be potentially subject to the reporting requirements of the Act if the applicable size-of-person and size-of-transaction tests were met. See 16 C.F.R. 802.51(b) (1997).
2.Purchaser is a wholly-owned subsidiary of Holdings, a recently formed limited liability company organized under the laws of England and Wales, which in turn is a wholly-owned subsidiary of Parent, a recently formed liability company organized under the laws of England and Wales (Parent).
3.None of Purchaser, Holdings or Parent have traded since formation.
4.At least eleven (and possibly more) employees (each an Employee and together Employees) of Alpha, a public limited company organized under the laws of England and Wales, will hold all of the issued and outstanding membership interests of Parent.
5.No Employee will have a right to fifty percent or more of the profits of Parent or have the right to fifty percent of Parents assets upon dissolution.
6.No person or entity will have the contractual right to appoint fifty percent or more of the board of directors of Holdings or Purchaser.
7.For Hart-Scott-Rodino purposes, Parent would be deemed to be its own sole ultimate parent entity and would be the sole ultimate parent entity of each of Holdings and Purchaser.
8.Until immediately prior to the time that Purchaser will purchase the shares of Target pursuant to the Transaction, it is anticipated that none of Purchaser, Holdings or Parent will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Transaction.
9.In addition, two tranches of warrants will be issued by Holdings (Holdings Warrants). Tranche 1 (Capital Holdings Warrants) will be issued to Alpha and tranche 2 (Income Holdings Warrants) will be issued to an affiliate of Alpha. The Holdings Warrants will be issued for a nominal value and will be exercisable for a nominal amount. After the Holdings Warrants become exercisable, at the option of Holdings, the Holdings Warrants can be exercisable for a number of Holding Shares representing 99.99% of the outstanding Holdings Shares or, at the option of Alpha, redeemed for cash in an amount equal to the net asset value of Holdings.
10.Funding to finance the Transaction will be at two levels: (i) Alpha will provide financing to Holdings; and (ii) either Alpha or a third party will provide financing to Purchaser.