Question
(redacted)
May 17, 1999
Richard B. Smith
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re:Filing obligations in Connection With a Spin-Off
Dear Dick:
I am writing to confirm our discussion the other day concerning the filing obligations related to the spin-off of a subsidiary to the shareholders of its parent.
To frame my questions, I had described to you a hypothetical shareholder who had filed a notification and report form to acquire in excess of $15 million of the voting securities of corporation a and who, following the expiration of the waiting period, had acquired those voting securities and exceeded the $15 million threshold. Corporation A subsequently announced that it would spin-off a 100% owned subsidiary, Corporation B, to its shareholders by distributing Corporation Bs voting securities pro-rata to those shareholders. The hypothetical shareholder would receive in excess of $15 million of the voting securities of Corporation B pursuant to the spin-off.
I asked two questions concerning the filing obligations related to these events. My first question was whether the hypothetical shareholder would have to file before acquiring the shares of Corporation B pursuant to the spin-off ? You explained that no filing would be necessary because the staff now interprets Rule802.10 to exempt a pro-rata spin-off of a subsidiary to the shareholders of its parent.
My second question was whether the hypothetical shareholder would have to file if he subsequently chose to acquire any voting securities of Corporation B in addition to those he had obtained through the spin-off. You explained, first, that Rule 802.10 would not exempt the acquisition of any voting securities of Corporation B other than those acquired pursuant to the spin-off. You also explained that the shareholders prior filing with respect to the acquisition of the shares of Corporation A would not provide an exemption with respect to the acquisition of any shares of Corporation B. For these reasons, you indicated that a shareholder who held, as a result of the spin-off, in excess of $15 million of the voting securities of corporation B would have to file before acquiring any additional shares unless there was another exemption specifically applicable to the transaction.
As always, thank you for your assistance.
Very truly yours,
(redacted)