Question
From: (redacted)
Sent: Tuesday, November 13, 2007 4:09 PM
To: Verne, B. Michael
Subject: HSR Reportability Analysis under Rule 801.30
Mr.Verne,
Thankyou for speaking with me this morning. I would like to confirm that myreportability analysis for the transaction we discussed is correct.
ABCCorp. ("ABC") is a privately held corporation. Several of ABC'sshareholders are proposing to sell 52.9 million shares of ABC's issued andoutstanding voting common stock currently owned by them (equivalent to about45% of ABC's issued and outstanding stock). One of the sellers owns 40.8million of the 52.9 million shares; the remaining 12.1 million shares are heldby several holders. The buyers would be a mixed group of new shareholders andcurrent shareholders. ABC would redeem a relatively small number of sharesitself. The purchase price is $24.50 per share, for a total purchase price forall 52.9 million shares of approximately $1.3 billion.
It is my understanding that these transactions aregoverned by Rule 801.30(a)(5), as they are acquisitions in which voting securities are to be acquired from aholder or holders other than the issuer or an entity included within the sameperson as the issuer. If you would, please confirm that I am correct.
Thefollowing is my reportability analysis of the different purchases that areexpected to take place. I would appreciate your confirming whether my analysisis correct and offering any advice or corrections you deem relevant:
Buyer #1 currently holds no ABC votingsecurities. Buyer #1 proposes to acquire 26.3 million shares of ABC forapproximately $644 million. After the purchase is consummated, Buyer #1 willhold 22.8% of ABC's outstanding voting securities. Buyer #1's purchase isreportable without regard to the size of the parties because it exceeds $239.2million. The filing fee will be $280,000.
Buyer #2 currently holds approximately16.5 million shares of ABC's voting securities. Buyer #2 proposes to acquire anadditional 9.8 million shares for approximately $240 million. Buyer #2'sacquisition will be reportable without regard to the size of the parties. Thefiling fee will be $280,000. While technically the value of Buyer #2's 16.5million existing shares must be aggregatedwith the 9.8 million shares it proposes to acquire for purposes of the size oftransaction test, the aggregationanalysis is essentially irrelevant in this situation because the purchase priceis more than $239.2 million.
Buyer #3 currently holds approximately25.2 million shares of ABC's voting securities. Buyer #3 proposes to acquire anadditional 1.3 million shares for approximately $31.8 million. Although this transaction is less than the basic size oftransaction threshold of $59.8 million, Buyer #3 must aggregate theshares it intends to buy with the shares it already owns for purposes ofdetermining whether its purchase is reportable. When Buyer #3's shares areaggregated with Buyer #3's existing shares, Buyer #3 would own an aggregateblock of ABC shares worth more than $600 million. Buyer #3's proposedacquisitions is therefore reportable without regard to the size of the partiestest. A fee at the $280,000 level would be payable with the filing.
ABC proposes to redeem 1.4 million ofits own shares for $34.3 million. Because ABC is simply redeeming its ownshares and the $59.8 million size-of-transaction threshold is not triggered, ABC's redemption is not reportable.
The fact that noneof the proposed sales, individually or in the aggregate, involves"control" of ABC as defined in the HSR rules is not relevant forpurposes of determining whether the transactions are reportable.
The acquired personfor purposes of each of these sales will be ABC. ABC is permitted to make asingle filing with respect to all reportable transactions. Under Rule801.30(b)(2), ABC can make this filingas late as the 15th day after the acquiring persons submit their filing, butmay file earlier if it wishes to do so. Ifthe parties wish to request early termination of the waiting period, ABC mustsubmit its filing before early termination will be considered by the agencies.
I am grateful for yourattention to this matter. Best regards,