0705025 Informal Interpretation

us-ftc-hsr-informal-interpretations-0391b51176e0f683a484e82420d178ac0705025 Informal InterpretationGuidance

Date
Rule
801.10
Staff
Michael Verne
Response/Comments
No - the debt would still not be included.

Question

From:(redacted)

Sent:Thursday, May 31, 2007 12:58 PM

To:Verne, B. Michael

Mike:

I havea question that I hope you can help me with. My client is engaged indiscussions to be acquired. The transaction will be structured as a shareacquisition/merger. My client has a large sum of debt. Hence the purchase pricefor the shares will be well below the current HSR threshold. I know that invaluing stock acquisitions for HSR purposes, one looks only at the price beingpaid for the shares. One does not include the value of the acquired company'sdebt that the acquiring person will pay-off at or shortly after closing.

Inthis case, the shareholders of my client have affiliated entities that hold thedebt of my client. Accordingly, at closing, the shareholders will receive theirportion of the purchase price for the shares and their affiliates will receivepayment from the acquiring company to cancel the outstanding debt. Is there anyreason why this arrangement (the affiliation between the shareholders and thedebt holders) would change the treatment of the debt payments for HSR purposes?

Thanks for you assistance.


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