2406001 Informal Interpretation

Date

June 10, 2024

Rule

802.10

Staff

Kristin Shaffer

Response/Comments

We disagree. It appears that all (or most) of the individuals or entities that will be receiving voting securities of ListCo do not directly or indirectly hold interests in Initial TopCo. Instead, they hold minority interests in entities that hold minority interests in Initial TopCo (or other entities that themselves hold minority interests in other entities that hold minority interests in Initial TopCo). This breaks the chain in determining what is held directly or indirectly.

Original Image - 2406001 Informal Interpretation (490.99 KB)

Question

From: Shaffer, Kristin <kshaffer@ftc.gov>
Sent: Monday, June 10, 2024 12:32:00 PM (UTC-05:00) Eastern Time (US & Canada)
To: [Redacted]
Cc: HSRHelp <HSRHelp@ftc.gov>
Subject: RE: 802.10 Reorganization

[Redacted]

Best regards,

Kristin

From: [Redacted]
Sent: Friday, June 7, 2024 5:30:36 PM (UTC-05:00) Eastern Time (US & Canada)
To: HSRHelp <HSRHelp@ftc.gov>
Cc: [Redacted]
Subject: 802.10 Reorganization

Dear PNO,

We are writing to confirm our conclusion that the following “Up-C” transaction, which will be undertaken in conjunction with an initial public offering (“IPO”), is not reportable under the HSR Act. The transaction involves a pre-IPO reorganization through which an existing LLC that currently is its own Ultimate Parent Entity (“UPE”) will become a subsidiary of a newly created corporation (which will become the new UPE). The new corporation will issue voting securities to the existing LLC stakeholders in proportion to their LLC ownership interests immediately before issuing additional voting securities to new public shareholders via the IPO. Because none of the existing LLC interest holders will hold a greater percentage of the voting securities of the new corporation than they currently hold in LLC membership interests (nor will increase their direct or indirect ownership interests in the LLC), and because no new assets will be contributed during the re-organization, we believe the transaction is exempt pursuant to Rule 802.10.

The specific steps of the transaction are summarized below:

Pre-Transaction: Initial Topco LLC (“Initial Topco”) currently is its own UPE. Certain of its LLC interests are held by various blocker entities and alternative investment vehicles, which in turn are held by various investors. Prior to the transaction, one of the existing minority LLC unit holders of Initial Topco, “IT Holder LP”, will transfer a portion of its Initial Topco LLC units to certain of its limited partners. As a result, these IT Holder LP partners (which are themselves blocker entities) will become direct holders of certain Initial Topco LLC units.
In the first step of the transaction, Initial Topco LLC will form a wholly owned subsidiary corporation, “Listco.”
Listco will form multiple blocker merger sub entities as subsidiaries. Certain of the blocker entities that hold minority LLC interests in Initial Topco LLC will then merge with these Listco merger subs, with the blocker entities surviving as wholly owned subsidiaries of Listco. Nearly simultaneously, the surviving blocker entities will be merged directly into Listco, with Listco surviving. In exchange, the current holders of the blocker entities will receive shares of Listco Class D common stock (carrying 10x voting power).
Listco will also form a management company merger sub, which will merge with “Management Co.,” another minority holder of Initial Topco LLC interests. As with the blocker entities above, Management Co. will survive the merger as a wholly owned subsidiary of Listco, but will be nearly simultaneously merged with and into Listco, with current Management Co. holders also receiving shares of Listco Class D common stock in exchange.
Listco will then issue Listco Class C common stock (which will be non-economic voting securities also carrying 10x voting power) to Initial Topco LLC, which will distribute such shares to the remaining Initial Topco LLC interest holders (who will retain their economic units in Initial Topco LLC).
Listco will also assume Initial Topco LLC options issued to employees and service providers and will convert those to options to purchase Listco Class A common stock (with 1x voting power).
Listco will immediately commence an IPO pursuant to which it will sell Listco Class A common stock (with standard 1x voting power) to public shareholders for cash. Listco will then transfer the cash proceeds received in the IPO to Initial Topco LLC in exchange for a number of Initial Topco LLC units equal to the number of shares of Listco Class A common stock sold.
As a result of the steps above Listco will become the new UPE, and will control Initial Topco LLC. All pre-transaction holders of Initial Topco LLC interests will receive proportional shares of Listco Class C common stock or Listco Class D common stock (which have equal voting power of 10x Class A stock). Public shareholders purchasing shares in the IPO will receive shares of Listco Class A common stock.

Because no new assets are being contributed as part of the pre-IPO reorganization, and because none of the pre-transaction holders of Initial Topco LLC will increase their ownership percentage in Listco, we believe Rule 802.10 exempts the transaction from HSR. (See https://www.ftc.gov/legal-library/browse/hsr-informal-interpretations/1307003 treating a generally similar Up-C transaction as exempt.)

Please let us know whether you agree with this conclusion.

Thanks in advance for your time and consideration.

Sheinberg, Samuel I.
From : 	HSR Help
Sent: 	Monday, June 10, 2024 12:32 PM
To: 	Walsh, Kathryn E. ; Be r g, Karen E. ; Musick, Vessel in a; Sheinberg, Samuel I. ; Si x, Anne; Whitehead, Nora;
Fetterman, M ichelle; Burton, Jun e; Larson, Peter
Subject: 	FW: 802.10 Reorganization
From: Shaffer, Kristin < kshaffer@ftc .gov>
To:
Cc: 	e p < 	e p 	c.gov>
Subject: RE: 802.10 Reorganizati on
Sent: Mon da , June 10, 2024 12:32:00 PM
We disagree. It appears that all (or m ost ) of the individuals or ent it ies t h at w ill be re ce iving voting secu rit ies of List Co do
-n ot dir ect ly or indirectly hold i nt erests in Init ial TopCo. Inst ead, t hey ho ld minori ty inte rests in entit ies t hat ho ld m inority
inte rests in Init ial Top Co (or othe r entit ies t h at th emselves hold m inority int er ests in other entit ies t hat ho ld m inority
inte rests in Init ial Top Co). Th is breaks the chain in d et erm ining w hat is held directly or indirectly.
Best regards,
Kristin
Kri stin Shaffer
Attorney
Pre merger Notification Office
Federal Trade Commission
202- 326-2388 I kshaf fer@ftc.gov
From:
Sent: 	astern Time (US & Canada)
To: HS RH el 	< HSRHel @ftc . ov>
Cc:
Su
De ar PNO ,
We are w1iting to confiim our conclusion tha t the fo llowing "Up-C" tran sac tion, which will be unde1tak en in conj unc tion
with an initial public offering ("IPO"), is not repo1table under the HSR Act. The transaction involves a pre-IPO
reorganization through which an existing LLC th at cunently is its own Ul timate Parent Entity ("UPE") will become a
subsidia1y of a newly created corporation (whi ch will become the new UPE) . The new c01poration will issue voting
sec uritie s to the existing LLC stakehol ders in p ropo1tion to their LL C ownership interests immediate ly before issuing
addi tional voting sec mitie s to new public sh areholders via the IPO . Because none of the existing LLC in tere st holders will
hold a greater percentage of the voting securitie s of the new c01poration than they cmTently hold in LLC membership
interests (nor will increase their direct or indirect ownership intere sts in the LLC) , and because no new assets will be
contributed during the re-organization, we believe the transaction is exempt pursuant to Rule 802. 10.
The spec ific steps of the transaction are summa1i zed bel ow :
• 	Pre-Transaction: Initial Topco LLC (" Initial Topc o") cmTently is its own UPE. Ce1tain of its LLC interests are
held by various blocker entitie s and alternative investment ve hicle s, which in tum are held by various inve stors.
P1ior to the transaction, one of the ex isting minority LLC unit holders of Initial Top co , " IT Holder LP", will
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transfer a po1ti on of its Initial Topco LLC units to ce1tain of its limi te d partners. As a re sult, these IT Holder LP
part ner s (which ar·e themse lve s bl ocker entities) will become direc t holders of ce1tain Initial Topco LLC units .
• In the fir st step of the transaction, Initial Topco LLC will fo1m a wholly owned subsidiary co1poration , " Listco."
• Li stco will fo1m multiple blocker mer ger sub entities as sub s idiar·ie s. Ce1tain of the blocker entities that hold
mino1i ty LLC intere sts in Initial Topco LLC will then merge with the se Li stco merger subs , with the blocker
entities smviving as wholly owned subsidi aries of Listco. Near·ly simultaneous ly, the smviving blocker entiti es
will be merged directly into Listco, with Listco smviving. In exchange, the cunent hol ders of the bl ocker entities
will receive shares ofLi stco Cl ass D common stock (car1ying l0x voting power).
• Li stco will also fo1m a management company mer ger sub, which will mer ge with "Man agement Co .," an other
mino1i ty hol der of Initial Topc o LL C intere sts . As with the blocker entities abo ve , Management Co . will smvive
the merger as a wholly owned sub sidia1y of Listco, but will be ne arly simultaneously merged with and into
Li stco , with cunent Management Co. hol ders also receiving shar·es ofListco Cl ass D common stock in exchange.
• Li stco will then issue Li stco Cl ass C common stock (which will be non-eco nomic voting sec uritie s al so canying
l0x voting power) to Initial Topco LLC , which will distribute such share s to the remaining Initial Topco LLC
interest hol ders (who will reta in their economic uni ts in Initial Topco LLC) .
• Li stco will also assume Initial Topco LLC opti ons issued to empl oyees and se1vice providers and will conve1t
those to op tions to purchase Listco Cl ass A common stoc k (with lx voting power).
• Li stco will immedi ately commence an IPO pursuant to whi ch it will se ll Li stco Class A common stock (with
standard lx voting power) to public shar·eholders for cash. Li stco will then transfer the cash proceeds recei ved in
the IPO to Initial Topc o LLC in exchange for a number of Initial Topco LL C uni ts equal to the number of shar·es
of Listco Class A common stock so ld .
• As a re sult of the steps abo ve Li stco will become the new UPE , and will control Initial Topco LLC. All pre
transacti on holders of Initial Topco LL C inter ests will receive propo1tional shares of Listco Class C common
stock or Listco Class D common stock (which have equal voting power of l0x Class A stock). Public
shar·ehol ders purchasing shares in the IPO will receive shares ofListco Class A common stock.
Bec ause no new assets are being contributed as part of the pre-IPO reorganization, and bec ause none of the pr e
transacti on holders of Initial Topco LLC will incr ease their ownership percentage in Listco, we bel ieve Rule 802 .10
exempts the transaction from HSR. (See http s: //www .ftc. gov/legal-libraiy/browse/hsr-info 1mal-inte1l)retations/l307003
treating a generally similar Up- C transaction as exemp t. )
Please let us know whether you agree with this conclusion.
Th anks in advance for y our time and consideration.
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2406001 Informal Interpretation

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