Question
March30, 2004
Michael B. Verne,
Pre-Merger Notification Office,
Bureau of Competition,
Federal Trade Commission,
600 Pennsylvania Ave. NW,
Washington, DC 20580.
Dear Mr. Verne:
On March 23, 2004, my colleagues, (redacted) and (redacted) and Ispoke with you to ask the Pre-Merger Notification Office's views as to whethera Hart-Scott-Rodino (HSR) filing would be necessary under the circumstances ofa transaction currently being contemplated by one of our clients. In that call,I summarized the key elements of the proposed transaction as follows:
The transaction involvestwo financial services companies and is essentially a financing transaction.
Common shares in anewly created Delaware corporation (the "Issuer") will be issued totwo investors: 1) an Australian investor which will subscribe for 51 % of thecommon shares; and 2) a US investor which will subscribe for 49% of the commonshares. The aggregate value of all of the common shares will be less than US$50million. Under the proposed structure, the US investor may at some point in thefuture acquire from the Australian investor the common shares in the Issuerheld by the Australian investor. Our client expects that, based on its currentview of the transaction structure, at the time of any such subsequentacquisition, the common shares of Issuer would be of nominal value and would bevalued at less than US $50 million.
At the time of itsacquisition of the common shares of the Issuer, the Australian investor willalso acquire senior preferred securities (probably in the form of debt) of theIssuer in an amount of approximately A$450 million. The US investor at thattime will acquire junior preferred securities of the
Issuer (alsoprobably in the form of debt) in an amount of approximately A$1 billion. Thesesenior and junior preferred securities will not carry voting rights.
The transaction isbeing structured so that the investments by the US and Australian investorswill be made almost entirely through the acquisition of the preferredsecurities, and the common shares will be of nominal value, for Australian taxreasons. Also, for Australian regulatory reasons, the Australian investor'sinvestment must rank senior to the common shares and to the US investor's A$1billion investment.
In order to exit thetransaction in a U.S. tax efficient manner in the future, the US investor wouldneed to acquire at least 80% of the value and the voting rights of Issuer. Ourclients expects that it would do so by purchasing all of the common shares andall of the senior preferred securities held by the Australian investor, throughthe exercise of a call right (or as a result of the Australian investorexercising a put right) either five years after the initial acquisition by theAustralian investor of these securities or earlier if certain specified eventsoccur.
During our phone conversation with you on March 23, you indicatedthat based on the foregoing facts and expectations with respect to value of thecommon shares of the Issuer, you agreed that a filing would not be necessary inconnection with the initial acquisition of the common shares and preferredsecurities by the US Investor and Australian Investor nor in connection withany subsequent acquisition by the US investor from the Australian investor ofthe common shares and senior preferred securities held at that time byAustralian investor.
We would appreciate if you would confirm that you concur in thissummary of the discussions of the proposed transaction by contacting me on(redacted) or (redacted) at your convenience.