Question
November 30, 2009
VIA EMAIL (mverne@ftc.gov)
Mr. Michael B. Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 303
00 Pennsylvania Avenue, N.W.
Washington, D.C. 20580 co
Dear Mike:
Thepurpose of this letter is to confirm the conclusion reached during a telephoneconference (redacted) and I had with you on November 13, 2009, in whichyou concluded that, under the facts described below, neither of the entitiesdescribed below controls the corporation. In particular, our inquiry related tothe interpretation of tile staff of the Federal Trade Commission of Rule801.1(b)(2) relating to whether either of tile entities described below has thecontractual power presently to designate 50% or more of the directors of thecorporation. The relevant facts, as we discussed them, are as follows:
C is a U.S. corporation. No person holds 50% or more of the issued and outstanding votingsecurities of C. Under a Shareholders Agreement, the holders of two classes ofC's outstanding voting securities, Class A common stock and Class B commonstock, have the right to designate the members of C's board of directors.Shareholder X holds 100% of tile issued and outstanding shares of the Class Acommon stock. Shareholder Y holds 100% of the issued and outstanding shares ofthe Class B COllli1l0n stock.
C has a fiveperson board of directors. Under the Shareholders Agreement, X and Y each havethe right to designate two members of the board. The right to designate tilefifth director is shared by X and Y; the designation must be made by mutualagreement, and X and Y thus each have tile contractual power to veto theother's choice of the fifth director. Neither X nor Y alone has tile unfetteredright to designate the fifth director. As a result, neither X nor Y has thecontractual power presently to designate 50% or more of the directors of C.
Based on thesefacts, you confirmed that neither X nor Y controls C. This conclusion issupported by two earlier informal staff interpretations (informalInterpretation Nos. 8712002 and 8807006) and is consistent with Interpretation38 published in the Premerger Notification Practice Manual (Fourth Edition).
Please call meimmediately at (redacted) should the position of the Federal TradeCommission staff with regard to this matter be different from that set fortl1above. In addition, please retain this letter in your files. Iappreciate very much your assistance and helpful advice on this matter.