Question
From: (redacted)
Sent: Monday, December 10, 2007 12:05 PM
To: Ferkingstad, James H.
Subject:Acquisition of Voting Securities of a Foreign Issuer
Mr. Ferkingstad:
Thank your for speaking to me this morning about theapplicability of 16 C.F.R. 802.51 -- the exemption for"acquisitions of voting securities of a foreign issuer" -- to the facts of a pendingacquisition. As I described to you, the facts are as follows:
1.The Target is aforeign company-with primary manufacturing facilities in foreign country X and a smallmanufacturing facility in the United States. The target makes sales in the United States from its U.S. facility in the $10-15 millionrange. The target's assets in the U.S. are substantially below the threshold under section 802.51.
2.The target makesonly about $2 million in sales directly to the United States from its foreign manufacturing facilities in country X.The target also sells about $75 million worth of a defense subsystem from thetarget's foreign facilities in country X to the foreign subsidiary of a U.S.defense contractor (also located in country X) for incorporation into a largersystem, like a vehicle or an aircraft. This larger system is sold by thepurchaser exclusively to the U.S. Defense Department. The particular militarysubsystem is specialized in the sense that it is designed for use on a particularvehicle or aircraft and generally will only work on that vehicle or aircraft (although the companyalso makes similar subsystems that fit on other systems).
3.The subsystems aredelivered to the foreign purchaser in country X. Some of these subsystems areassembled into the larger system in the purchaser's factory in country X andthe resulting larger system is then exported to the U.S. for sale to the U.S. DefenseDepartment. The rest of these products are exported from country X to the U.S. by the purchaser and thenassembled into the system in the U.S. and subsequently sold to the U. S. Defense Department. The target has nocontrol of what is done with its products and does not know what proportion isassembled in each place.
You confirmed our analysis that the exemption of 802.51applies. The relevant sales by the target are delivered in the foreign country, and the targethas no control ofthe products once they are delivered to the foreign purchaser. The target iscompeting in the foreign part/component market with respect to these sales, andthey should not beconsidered sales "in or into the United States" under the exemption.