Question
From: (redacted)
Sent: Wednesday, October 22, 2008 8:31 PM
To: Verne, B. Michael
Cc: (redacted)
Subject: 7(A)(c)(10) Question
Importance: High
Attachments: 0403003 Informal StaffOpinion -801.10, 801.90.htm
Mike,
(Redacted) and I are analyzing a scenariowhich involves an investor who is purchasing additional voting securities of anissuer but who, given the simultaneous purchases of voting securities by otherinvestors, will see his percentage of outstanding diluted. Given this dilutionwe view the transaction as exempt pursuant to 7A(c)(10) but wanted to make surethat additional facts (described below) didn't give rise to a reportingobligation assuming an otherwise jurisdictionally sufficient transaction.
Assume that the investor ("A")is an existing minority shareholder of the issuer ("B") and has arepresentative on the board of B. For legitimate business reasons unrelated toHSR considerations, B has structured the financing round such that it will usea portion of its proceeds to later repurchase/redeem some of its previouslyissued voting securities. That future redemption of shares will then increasethe percentage of voting securities held by A and certain other existingshareholders, although A will not end up controlling B.
The question is whether A is making an"acquisition" by virtue of seeing its percentage of outstandingincrease as a result of the redemption. Although we did not see anyinterpretation directly on point, the attached interpretation provides that thesubsequent redemption of shares by a company in such circumstances should betreated as separate, and is not aggregated with the actual acquisition ofvoting securities by the acquiring party for HSR purposes (where thetransactions have been structured for legitimate business reasons, as here,rather than for the purpose of avoidance of any HSR filing obligation).
0403003 Informal Staff Opinion -801.10,801.90.htm Please confirm that A's board membership on B does not render thelater redemption of shares by B an acquisition on A's part. We assume that ifthese facts render the later redemption to not be an acquisition it doesn'tmatter whether or not A was "instrumental" in structuring the deal solong as the deal was structured for legitimate business reasons.
If you conclude that the redemption wouldbe viewed as an acquisition please confirm that the time of the"acquisition" would be when the redemption would increase A's votingpercentage (meaning that A would be able to make its original, dilutive,acquisition but would need to file and observe a waiting period before thelater redemption became effective).
If you need any additional facts or wantto discuss this, both Rick and I are available for a call at any time that'sconvenient to you tomorrow (if you have any availability tomorrow whatsoever).Apologies in advance for the short notice, but the transaction has cometogether at lightning speed and any delay makes it likely that issuer willsimply choose to close on all other investors' pieces of the deal. If it does,that would deprive my client of the pro rata exemption --since its investmentwould then trail the others and not be diluted by them in a simultaneousclosing. Therefore, could you please try to confirm your conclusion onThursday, October 23rd, if at all possible.