Question
From:
Redacted
Sent:
Monday, July 19, 2010 11:32AM
To:
Verne, B. Michael
Subject:7A(c)(3)/FMV/Contingent Acquisitions Questions
Hi Mike,
I hope that all iswell and you are enjoying your summer. I want to run a few related scenarios byyou
regarding aproposed transaction. I haven't been able to find anything directly on point.
Questions:
1. In the event a buyer purchases 50/0 of thevoting securities of a target but does not meet the size of transactionthreshold, we all agree that no HSR filing is required at that time that thebuyer purchases such 50%. In the event that the buyer later acquires additionalvoting securities of the target and crosses the size of transaction threshold(after aggregating what buyer already holds), is the transaction exempt fromfiling under Section 7 A(c)(3) because the buyer already owns 50/0 ofthe voting securities of the target? [MV YES]
2. Now say that buyer is entering into an agreement topurchase voting securities of the target in multiple stages. Buyer already owns30/0 of target. Now buyer is entering into an agreement to purchase anadditional 10% of the voting securities of target this year and an additional10% next year. It is a certainty that these two acquisitions will happen. Whenshould buyer do a fair market valuation of the voting securities of target thatbuyer already owns -when the parties enter into the purchase agreement, or whenbuyer is actually getting ready to make the acquisitions at the end of tt1isyear and at the end of next year?[MV At the time of the 1stacquisition. Aggregate & file for 50% before 1st closing]
3. Nowsay that Buyer is entering into an agreement to purchase stock as noted aboveso that Buyer, which already owns 30% of the voting securities of target, isagreeing to purchase an additional 20% of the voting securities of target overthe next two years. As noted above, it is a certainty that these acquisitionswill happen. Buyer is also agreeing in the same agreement to purchase theremaining 50% of the voting securities target in three stages which arecontingent upon certain milestones being met. These three contingentacquisitions are dependent on certain milestones outside the control of buyer.We do not believe that the size of transaction threshold will be met withbuyer's acquisition of the initial 501'0 but that depends somewhat on theanswer to the question above on when to do fair market value determinations.However, the size of transaction threshold would be met if buyer makes thefirst of the three contingent acquisitions.
We do not believethat buyer should file now for acquiring 100% of the voting securities targetas it is not certain that buyer will actually acquire 100% of the votingsecurities of target. Assuming that the milestones for the first contingentacquisition are met and that the transaction thresholds will be met afteraggregating the fair market value of the voting securities of target alreadyheld by buyer, should buyer make a filing at the time the first milestone ismet but prior to consummating the transaction. [MV Yes] \Would thetransaction actually be exempt under Section 7A(c)(3) as buyer will own 50% ofthe voting securities of the target (but buyer will not have made an HSR filingfor the transaction as the size of transaction threshold will not previouslyhave been met) before any of the milestone acquisitions would occur? I wouldappreciate your insights on these questions.