Question
From:(redacted)
Sent:Thursday, September 06, 2007 11:04 AM
To:Verne, B. Michael
Cc:(redacted)
Subject: Scope of Item 4(c) InConnection with Transactions Involving Multiple Parties and Multiple Steps
Mike, we have questions about the scope of Item 4(c)in connection with two separate transactions involving three parties. A summaryof the facts and our analysis are below.
Facts: A and B are in discussions regarding apotential acquisition of 100% of A's shares by B. While attempting to induce Bto increase the value of its offer for the A shares, A tells B that B couldprobably sell certain A assets to third parties, including C, after the A-Btransaction is consummated. B subsequently agrees to acquire 100% of A'sshares. In a separate transaction to which A is not a party, B agrees to sellcertain A assets to C after the A-B transaction closes. A did not participatein the negotiations regarding the B-C transaction, A is not a party to the B-Ctransaction, and closing of the A-B transaction is not contingent on closing ofthe B-C transaction. Given certain corporate complexities associated withseparating the A assets to be sold to C and other issues, it is anticipatedthat the A-B and B-C transactions will not close simultaneously and B will own100% of A, including the assets to be subsequently sold to C, for 3-4 monthsand possibly longer.
Ahas identified two documents that have content that could be considered 4(c):
1. During the negotiations between A and B, A's officersprepare an analysis that is provided to B's officers ("Document 1").Document 1 was prepared as part of the A-B negotiations and with the hope ofinducing B to increase its offer for A, in part, by trying to convince B thatthird parties, including C, may place a higher value than B on certain Aassets. Document 1 has information that could be considered 4(c) content withrespect to the A-B and B-C transactions.
2. In anticipation of discussions between A and B, adocument is prepared for an officer of A relating to the possible B-Ctransaction ("Document 2"). Document 2 was circulated internally toofficers of A, but was not provided to B or C. Document 2 does not contain any4(c) content with respect to the A-B transaction, but has content that could beconsidered 4(c) for the B-C transaction. As noted, Document 2 was not providedto B or C and thus could not have been relied on by either B or C in connectionwith their transaction.
Analysis and conclusions: A is not a party to the B-Ctransaction and A does not have an HSR filing requirement for the B-Ctransaction. For purposes of Item 4(c) for A's HSR filing for the A-Btransaction, Document 1 could be a 4(c) document for A's HSR filing for the A-Btransaction because it has information that could be considered 4 (c) contentfor that transaction. Document 2, which does not include information related tothe A-B transaction, is not a 4(c) for A's HSR filing because the B-Ctransaction is not "the acquisition" as to A; A-B is the only"acquisition" for which A has a filing requirement and thus it isunder no obligation to provide any documents for the B-C transaction, or anytransaction other than A-B. While A must provide information to B for Item 5 ofB's HSR for the B-C transaction (assuming B and C decide to file HSR before A-Bcloses), there is no obligation for A to search for and provide potential 4(c)documents to B for the HSR filing for the B-C transaction (see Informal StaffOpinion 0707007, available at http:/fwww.ftc.govibc/hsr/informal/opinions/0707007.ntm).
In our experience, it is up to the parties todetermine the scope of the transaction for which they are filing HSR (which, ofcourse, is based on the underlying transactional documents) and all documentsand information provided with the HSR filings, including the 4(c) documents,are limited by this determination. While not directly on point, the "steptransaction" analyses in Opinions 48 and 57 also support the position thatthe A-B and B-C transactions are separatetransactions for purposes of the HSR filing analysis and scope of A's 4(c)requirements.
Please let us know ifyou agree with this analysis and our conclusions regarding Documents 1 and 2.