0609003 Informal Interpretation

From:(redacted)

Sent:Monday, September 11, 2006 2:45 PM

To:Verne, B. Michael

Subject:Question under the HSR rules

Michael:

Threeindividuals (X, Y and Z) each hold shares in three companies (A, B and C) andare the only shareholders of these companies. X holds a controlling interest inall three companies. The parties wish to form a Holdco (corporation) that willcombine the three companies. X will acquire a controlling interest in Holdco.My question is whether Y and Z have to worry about possible reportingobligations under 801.40, if the value of their respective interests in Holdcoexceed $56.7 million.

As I understand theinterplay of 801.40 and 802.4 and 802.30(c), individual Y would first determinewhether the FMV of the non-exempt assets (i.e., those contributed by X and Z)exceeds $56.7 million. If it doesn't, then Y doesn't have to file because Holdcodoesn't have at least $56.7 million of non-exempt assets. If Holdco has morethan $56.7 million of non-exempt assets, then Y has to file if the value of theshares of Holdco that it acquires in the formation transaction exceeds $56.7million (and SOP tests are met). Presumably Y has to value its shares withreference to the percentage of the entire enterprise that its stock represents(and the value of the enterprise includes the value of Y's contribution as wellas those of X and Z).

Same exercise for Z.

IfHoldco were instead formed as a non-corporate entity, nobody has filings,because X gets intra-person treatment, and neither Y nor Z will acquire acontrolling interest in Holdco.

Have I got the analysis right?