Question
From: (redacted)
Sent: Friday,November 18, 200512:30 PM
To: Verne,B. Michael
Subject: Confirmationre Indirect Acquisition of Unincorporated Entity
Dear Mike:
I had a chatwith Karen Berg when you were out on Wednesday and she suggested I take up thefollowing with you.
Attached pleasefind a structure chart that reflects the following transaction. I am seekingconfirmation that an indirect acquisition of "control" over thelowest tier unincorporated entity will not make an otherwise exempt transactionreportable.
In thetransaction, the UPE of Acquiror is acquiring a 51 % interest in the InvestmentPartnership from the Acquired Person. The purchase price for these interests is$10M. My understanding is that one would determine the purchase price of thistransaction under 801.10(d) by aggregating the acquisition price of thepurchased interests and the fair market value of the interests in theInvestment Partnership already owned by the Acquiring Person. I furtherunderstand that, pursuant to 802.4, one would exclude any value associated withthe minority interests held by the Investment Partnership in the two LLCs shownon the diagram.
Nevertheless, wenoted in this transaction that the acquisition of the partnership interest inthe Investment Partnership would increase UPE of Acquiror's indirect interestsin Project Company LLC from approximately 41 % to greater than 50%. The valueof greater than 50% of Project Company LLC is well over the size of transactionthreshold. We wish to confirm that this fact does not change the aboveexemption analysis, i.e., that there is no reportable "secondaryacquisition" in this transaction.
We believe thisis the case based on the language of 801.10(d) which focuses solely on theinterests in the unincorporated entity that is being directly acquired. Ourunderstanding is that the effect of the transaction with respect to ProjectCompany LLC is simply to make UPE of Acquiror the UPE of Project Company LLCwith respect to future transactions involving that unincorporated entity.
I would like toconfirm this with you and to get your views on the proper way to articulate whythe indirect change of control in Project Company LLC is not reportable. I willcall you today to see if you are available.