Question
From:(redacted)
Sent:Monday, March 12, 2007 11:47 PM
To:Verne, B. Michael
Subject:Rule 801.2(d)(2)(iii) Question
Mr.Verne:
We'reworking on a reportability analysis and are wondering if you could provideguidance on the following size-of-the-transaction question:
Aand B are consolidating to become wholly owned subsidiaries of a newly formedcorporation. Under Rule 801.2(d)(2)(iii), each party will be deemed both anacquiring and an acquired party. As I interpret the rule, there are thus twopotentially reportable transactions: (i) A acquires B and (ii) B acquires A.The question is whether the sizes of A and B are aggregated for purposes ofvaluing the transaction. I assume not, but would like confirmation.
Forexample if A's total assets or total net sales is $7m and B's is $53M, then Iinterpret the rule to yield two nonreportable transactions: A acquires B with atransaction size of $53M, and B acquires A with a transaction size of $7M.
Butif the two valuations are aggregated, the total transaction size would be $60Mand reportable. Can you provide guidance on the correct reading of this rule? Ihaven't found a written interpretation or example anywhere. Many thanks.