2407002 Informal Interpretation

Sheinberg, Samuel I.
From:
Sent:
To:
Subject:
HSRH elp
Tuesday, July 30, 2024 10:29 AM
Walsh, Kathryn E.; Berg, Karen E.; M us ick, Vesselina; She inberg, Samue l I.; Six, Anne;
Wh itehead, Nora; Fetter man, Michelle; Burton, June; Larson, Peter
FW: Premerger N oti fication Requirements for Stock Sale - Si ze of Transaction Test
Analys is
From: Shaffer, Kristin < kshaffer@ftc.gov>
Sent: Tuesday, July 30 , 2024 10:28:48 AM (UTC-05:00) Eastern Time ( US & Canada)
To:
Cc: HSRHe lp < HSRHelp@ftc.gov>
Subject: RE: Premerger Notification Requ irements for Stock Sa le - Size of Transaction Test Analysis
_ 	,
You are correct that the size of the transaction w ould be the determined acquisit ion price or fair market val ue of the
v ot i ng securitie s, as required by Ru le 801.10 . Note, however, that allocating the tota l con si deration betw een v ot ing and
non-voting securit i es for the purpose of making the transaction non-reportable would vi o late Ru le 801.90, w hich
prohibits transaction structures designed to avoid HSR reporting obligations. Further, if a fair market valuation is
required, the board of directors of the acquiring UPE ( or its delegee) must make this determinat ion on a commercially
reasonable bas is and in good faith. Wh ile the PNO does not require or endorse an y particular methodo logy, factors such
as the acquiring person' s ordinary course documents discuss ing valuation, and what a third part y w ould pay for just the
v ot i ng securities, wi thout the acqu is ition of the non-v ot ing securit ies ( or just the non-v ot ing securities, wi thout the
acquisit ion of the voting securities) may be relevant to the determination.
Best regards,
Kr istin
Kristin Shaffer
Attorney
Premerger Not ifi cat i on Office
Fede ral Trade Commiss i on
202- 326-2388 I kshaffer@ftc.gov
From:
Sent: Monda y, Ju ly 29 , 2024 6:34:37 PM (UTC-05:00) Eastern Time ( US & Canada)
To: HSRHelp < HSRHe lp@ftc.go v>
Subject: Premerger Notification Requ irements for Stock Sale - Size of Transaction Test Analysis
To W hom It Ma y Concern,
Upon reviewi ng the app li cable statute, regulations, and informal i nterpretat ions, we are writing to confirm the
treatment of v ot ing and non-voting shares for purposes of determin i ng if the size-of-transaction test is met. Assume a
Corporation is an S corporation with three shareholders. Shareholders 1 and 2 are individuals w ho each ow n 49 v ot ing
shares and 9,900 non-v ot i ng shares. The th ird shareholder is a Trust whi ch ow ns 153 v ot ing shares and O nonvoting
shares and is the UPE of the Corporation. As such, the v ot ing shares comprise approximately 1.2% of the tota l
outstanding shares of the Corporation and the portion held by the Trust comprises 0. 7%. Each share, v ot ing or non
v ot i ng , has equa l financial rights. The capitalization structure of the Corporation has been in pl ace since 2007 and w as
instituted for reasons independent of the proposed transaction and HSR Act.
The acquiri ng ent it y de si res to purchase 100% of outstandi ng shares of the Corporation for approximately $222 mi llion.
We are writing to confirm that for purposes of the size-of-transaction test purposes, only the value of the 251 v ot ing
shares being transferred is considered and the value of the 19,800 non-voting shares is disregarded. Further, in
accordance wi th Regu lat ion 801.10, the value of non-publi cl y traded v ot ing securities is either (1) the acquisit ion pr i ce
1

or, if not determined (2) the fair market value as determined in good faith by the acquiring UPE board. If so, the value of
the voting shares is likely significantly below the filing threshold. As such, the size of transaction test would not be met
and no HSR filing would be required.
Thank you in advance for your time and assistance.
Best,
2