Question
(redacted)
August 20, 1986
VIA FEDERAL EXPRESS
Patrick Sharpe, Esq.
Compliance Specialist
Pre-Merger Notification Office
Room 303
Federal Trade Commission
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Re: Interpretation of Ultimate Parent Entity
16 CFR 801.1(a)(3)
Dear Mr. Sharpe:
Pursuant to our telephone conversation of Wednesday, August 20, 1986, I hereby request that the Pre-Merger Notification Office of the Federal Trade Commission determine that A Corp. is the ultimate parent entity of the acquired person in the acquisition described below.
A Corp. is a U.S. corporation involved in manufacturing. U Corp. proposes to acquire 100% of the issued and outstanding voting securities of A Corp. for less than $20 million. A Corp.a voting securities are held by B Corp., a non-U.S. corporation, which holds record titile to 64.5% of the voting securities, and by six United States individuals who, as a group, own 35.5% of the voting securities of A Corp. Of the six, four individuals are management employees of A Corp. (Management Employees), and two are private investors who are also consultants to A Corp.
B Corp. is record holder of the shares of A Corp. as nominee for a pool of approximately 30 foreign investors (the Investors), but B Corp. has sole discretion for investment decisions, including the sale of the stock of A Corp. and voting of investments. The shareholders of B Corp. have the right to mange and control B Corp.s investments, but not the right to share in dividends and profits. All of the stock of B Corp. is owned by persons who are not citizens or residents of the U.S.., none of whom own, control, or have the right to vote more than 50% of the outstanding stock of B Corp.
However, pursuant to an agreement among shareholders of A Corp., executed at the time of the acquisition of A Corp. from its previous owner, all of the shareholders of A Corp. agreed to vote their shares to assure the election of two directors nominated by C Corp., two directors nominated by the Management Employees, and one director selected by two private investors.
As a consequence, B Corp., while having record title to 64.5% of the voting securities, does not have the present power to elect a majority of the directors of A Corp.
Thus, although B Corp. holds record title to 64.5% of the voting securities of A Corp., it has fragmented its indicia of ownership in such a way that it does not have control over A Corp. and passes through the economic benefits of ownership to the Investors who have place funds with B Corp. for investment. Therefore, we concluded that A Corp. is a person that is not controlled by any other person.
For this reason, we request your determination that A Corp. is the ultimate parent entity as that term is defined in 16 CFR 801.1 (a)(3).
Please let me know as soon as possible whether the Commission concurs in this interpretation. We understand that you will give us a determination by telephone within 48 hours after receipt of this letter, to be confirmed by a letter.
Very truly yours,
(redacted)
(redacted)
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