Question
From: (Redacted)
Sent: Tuesday, November 17, 2009 9:04 PM
To: Verne, B. Michael
Cc: (Redacted)
Dear Mike,
I hope all iswell.
We represent abuyer that has put out a cash tender offer for a company publicly traded on a stockexchange outside the United States. Both the buyer and target have made theirrespective HSR notifications, and the waiting period is running. Because thetrading price of the target is currently below the tender offer price, thebuyer would like to enter into a contractual arrangement with one or morefinancial institutions that would permit (but not obligate) the buyer toacquire target stock for a fixed period of time for a fixed price ("strikeprice"). The arrangement could take the form of an option to buy targetstock at the strike price. Alternatively, the buyer would enter into a forwardcontract with the financial institution(s) that would allow the buyer topurchase the target's stock in the future at the strike price.
Under eitherarrangement, the agreement between the buyer and the financial institution(s)would prohibit the buyer from exercising the call option/forward contract untilafter it obtains HSR clearance. The buyer would also be prohibited from votingor directing the financial institution(s) to vote the underlying securitiesuntil after such exercise. The parties do not expect that the target will payany dividends before the call option/forward contract expire; however, ifdividends are paid, they will be paid to the financial institution and thebuyer would receive such dividends only if it exercises its call option/forwardcontract.
I believe thatthe acquisition of the call option/forward contract is not a reportable event,although the exercise of either would be reportable. See ABA Section ofAntitrust Law, Premerger Notification Manual, Interpretation 29 (4th Ed. 2007)("[t]he granting of an option to purchase voting securities at some futuretime is, by itself, generally not reportable, although the exercise of thatoption may give rise to reporting and waiting period obligations.");Informal Interpretation 0710009 (http://www.ftc.gov/opinions/0710009.htm<http://www.ftc.gov/opinions/071…; ). Please let me know if youagree, or if you are available for a call in the morning to discuss