0601002 Informal Interpretation

us-ftc-hsr-informal-interpretations-4673aadda3e1ea6fb5f6d5efd873e8b10601002 Informal InterpretationGuidance

Date
Rule
801.10
Staff
Michael Verne
Response/Comments
Agree.

Question

January 4, 2006

Via Electronic Mail

Michael Verne

Premerger NotificationOffice

Federal Trade Commission

Washington, D.C.

Dear Mike:

As we discussed on thetelephone, I am writing to confirm an interpretation you provided in responseto the following hypothetical: Company A is planning to acquire all of thevoting securities of Company B for approximately $50 million. The final purchaseprice is subject to certain adjustments to be made at closing based on workingcapital and the like. As a result, the final purchase price will not bedetermined until the date of closing. The adjustments may, but will notnecessarily, push the final purchase price above the $53.1 million size of thetransaction pre-merger reporting threshold.

You responded that under thesecircumstances, the acquisition price is not "determined." The boardof the acquiring party must therefore make a good faith determination of thefair market value of the voting securities being acquired pursuant to Section801.10(c)(3) of the HSR Rules. That valuation, not the final purchase price,will determine the reportability of the transaction. If the valuation is lessthan $53.1 million, no reporting is necessary and there will be no violationeven if the final purchase price as adjusted exceeds $53.1 million.

Please let me know if theforegoing does not accurately reflect the interpretation you provided.


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