1102007 Informal Interpretation

us-ftc-hsr-informal-interpretations-0cba7ef7819e80e1c3e1d8410a096e2b1102007 Informal InterpretationGuidance

Date
Rule
801.2
Staff
Michael Verne
Response/Comments
Yes -the acquisition by E of X, Y and Z is separately reportable. You are correct that if the spinoff occurs pre-acquisition by A, B is the acquired UPE. If the spinoff occurs post acquisition, A is the acquired UPE.

Question

From:

(Redacted)

Sent:

Wednesday, February 16, 2011 12:38 PM

To:

Verne, B. Michael

Cc:

(Redacted)

Subject: HSR question

Mike,

I am working on the followingtransaction:

"A" proposes to acquire"B" for more than $2 billion in cash. B is its own ultimate parententity.

At the closing, and simultaneously withthe acquisition of B, three of B's existing businesses (which will likely betransferred to separate subsidiaries of B prior to the closing) ("X,""Y" and "Z") will be spun-off (i.e., sold) to members ofB's current management (most likely to an entity formed by management to makethe acquisition ("E")), for approximately $500 MM as follows:

100% of X will be sold to E. A willsupply low cost financing to E for the purchase of X.

70% of Y will be sold to E. A willcapitalize Y with working capital of approximately $37.5 MM.

85% of Z will be sold to E. A willcapitalize Z with working capital of approximately $37.5 MM and forgive Z'snote in the amount of $20 MM.

Assuming that the relevant thresholdsare met, and that an HSR filing will be made by A for the acquisition of B,

will an HSR filing be required inconnection with the spin-off of X, Y and Z to E?

If the answer is yes, how should we determinewho should file as the acquired person in connection with the spinofftransaction? Am I correct that the answer turns on whether beneficial ownershipof B passes to A prior to the spin-off of X,Y and Z?


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