Question
From:(redacted)
Sent:Friday, August 04, 2006 2:37 PM
To:Verne, B. Michael
Subject:HSR question
Mike, another question.
Iam considering how to apply the 802.4 exemption to a hypothetical acquisition of100% of the voting securities of an issuer whose only holdings are minorityinterests in two unincorporated entities. Upon consummating the acquisition,the buyer will obtain a controlling interest in the one of the twounincorporated entities ("second unincorporated entity"), due to thebuyer's prior holding of interests in that entity. The buyer will pay a lumpsum for the voting securities, and the purchase agreement will not allocate theprice between the two unincorporated entities.
I understand that the acquisition of the minorityinterests in the first unincorporated entity is not counted toward the $56.7million threshold of 802.4.
Howshould the value of the interests in the second unincorporated entity bedetermined? According to 802.4(c), the value of the "assets" of theissuer whose voting securities are being acquired shall be the fair marketvalue, determined in accordance with 801.10(c). Alternatively, 801.10(d)provides that, in an acquisition of non-corporate interests that conferscontrol of an unincorporated entity, the value of the non-corporate interestsheld as a result of the acquisition is the sum of the acquisition price of theinterests to be acquired (provided that the acquisition price has beendetermined), and the fair market value of any of the interests in the sameunincorporated entity held by the acquiring person prior to the acquisition;or, if the acquisition price has not been determined, the fair market value ofinterests held as a result of the acquisition. Which section applies?
If801.10(d) applies, is the acquisition price of the interests in the secondunincorporated entity "determined?" At the time that the agreement tobuy 100% of the voting securities is entered, the buyer is able to allocate thetotal purchase price between the interests in the two unincorporated entities,even though the purchase agreement will not do so. Would the buyer's allocation(as of the date the purchase agreement is entered) constitute the acquisitionprice being "determined?" Or would a fair market valuation berequired in accordance with time frames set out in 801.10(c)?
Many thanks for yourhelp.