1001002 Informal Interpretation

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·E;o'--- ~Verne, B. Michael
From:
So nt: 	Wednesday, January 06, 201 O 5:37 PM
To: 	Verne, B. Michael
Subject: HSR Question
Mike,
First, happy new year!
Second, I've been puzzling over a fact patlern that I need your advice about. Here il is:
A has a 49% membership interest in an existing LLC, in which B has a 51 % interest. A and B want lo contribute additional assets lo the LLC and, Jn the process, convert ii from an LLC lo a
corporation. Far lax reas ns, lhe events are sequenced as follmvs~
(1} B conlributes addi1ional assets and increases Its membership interesls from 51% lo 64%.
{2) The LLC is converted lo a corporation; A raceivas 36% of the voling securities and 8 receives 64% of the voting securities. A's 36% of the stock is worth less than $50 million (as
adjusted) and B's 64% is worth more than $50 million (as adjusted).
13) A contributes additional assets and receives additional voling securilies so that each of A and B has 50% of lhe new corporation. The value of the new corporation is high enough thal
50% of the voting securities are worth more than $50 million {as adjusted).
It seems to me that step (3) requires a filing by A in that A will acquire voting securities worth more than $50 million (as adjusted} and the transaction ls nol exempt under 802.1D.
What rm not sure aboul is whether in step {2) Bis required 10 me when ii acquires 64% of the voling securities of the converted LLC. II seems to me oughl to be exempt under 802.30 or
perhaps 802.1 D, but Example 3 to 802.10 suggests il may not be. Whal do you think?
Please give me a call if you wan! to discuss.
Thanks for your help.
Best,
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1/7/2010 	n

I would look at the steps sequentially and analyze which are
reportable.
1) non-reportable - 	B already controls LLC so its increase from
51 % to 64% is exempted by§ 802.30. A does not control LLC, so
it does not have a filing as an acquiring person for the new assets
B is contributing to LLC.
2) non-reportable - the earlier contribution of assets is not
considered when the LLC is converted to a corporation. Since
both A and B are receiving voting securities pro rata to the
interests they hold in the LLC, this step is exempt under§ 802.10.
3) Agree - A has a filing in its acquisition of voting securities of
the new corporation. B may also have a reportable acquisition if
the assets contributed by A are valued at more than $50 million
(as adjusted), since it controls the corporation prior to the
contribution of the assets.