2202004 Informal Interpretation

Sheinberg, Samuel I.
From: 	HSRHelp
Sent: 	Fr iday, February 25, 2022 1: 12 PM
To: 	Wa lsh, Kathryn E. ; Berg, Ka ren E. ; Musick, Vessel ina ; Sheinberg, Samuel I. ; Six, Anne; Wh itehead, Nora
Subject: 	FW : Question about Transaction
From: Shaffer, Kr istin <kshaffe r@ ftc.gov>
Sent: Frida y, February 25, 2022 1:12:25 PM (UTC-05:00) Eastern Time ( US & Ca nada)
To:
Cc:
Based upon y our description, we agree that the Trust should be treated as a non-corporate ent ity, as described in y our
-second analysi s.
Best regards,
Kr istin
Kristin Shaffer
Attorney
Pr emerger Notificat ion Office
Federal Trade Commission
202-32 -
From:
Sent: Thursda y, February 24, 2022 12:03 PM
To: HSRHelp <HSRHelp@ftc.gov>
Cc:
Subject: Question about Transaction
Dear Staff:
We would appreciate y our ass istance in determining w hether an HSR fi li ng wou ld be required under the following facts,
which as you will see invo lv es the proper ana ly sis of w hat amounts to a vot ing trust .
1. 	A is the Ult imate Parent Entity and ho lder of "' 65% of the v ot ing securities of Corporation, a Mexican publi cl y
traded corporation. The remaining "'35% of its shares are held by the public. B is a US person.
2. 	A and B will enter into a Trust Agreement to establish an irrevocable management trust ("Trust ") under Mex ican
law. The Trust Agreement will i dentify the Trust's i nit ial trustee. Neither A nor B will have the right to remove
and replace the trustee unilaterally going for ward.
3. 	Simultaneously w ith the creation of Trust, (i) A will contribute to Trust all of its Corporation shares (the " A
shares"), va lued above the app li cable HSR size of transaction threshold; and (ii) Bw ill contr ibute cash to the
Trust's corpus.
4. 	The terms of the Trust Agreement will require the Trust to use the cash to commence a tender offer for the
remaining 35 % of Corporation' s shares held by the pub li c (the " B shares"), which are va lued above the HSR size
of transaction threshold. (Assume no other exemption applies.)
5. 	Pursuant to the Trust Agreement (i) A will be ab le to direct the Trustee on how Trust must v ote the A shares and
will incur the economic benefits (i.e., dividends) of the A shares; and (ii) B will be able to direct the Trustee on
how to v ote the B shares and will incur the economic benefits (i. e. , dividends) of such shares.
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6. 	Trust wi ll grant Units to A and B that contain the "Trust Rights", e.g., the rights to the A and B shares,
respectively set forth in #5. The Units are transferrable to th ird parties in certain circumstances; the transferee
steps i nto the shoes of the transferor.
7. 	The Trust Agreement spe ci fies that the Trust is not a business trust.
8. 	The Trust will term inate after 20 years (unless A and B agree to extend); upon A or B ceasing to ho ld any Uni ts ;
or upon the agreement of A and B, w ho will i nstruct Trustee to term inate the Trust. Upon term ination of the
Trust, A shares wil l revert to A and B shares will rev ert to B( or possib ly to a th i rd part y if any Units have been
transferred).
Analysis
This seems like the same situation encountered in e.g., 1503001. There the PNO appeared to agree wi th the proposit ion
that " the UPE of an ent it y having a group of shareholders w ho had formed and transferred a majorit y of the ent it y' s
shares to an i rre vocable v ot ing tru st w as the v ot ing trust itself." The PNO added that " since the vot ing trust [in that
si tuation w as ] irrevocable, it w ou ld be the UPE. " The PNO further advised that ear li er i nterpretat i on that the settlors, by
vi rtue of the ir ul timate reversionary i ntere st , w ould be deemed to ho ld the voting securities at issue w ere " outdated."
This leads us to conclude that the Trust is i ts own UPE in our circumstances as w ell.
From there , the analysis seems straightfor w ard:
1. 	The acquisi tion of 65% of the v oting securities of Corporati on is exempt under 802. 71 (" Acquisit ions resu lt ing
from a gift, intestate succession, testamentary disposit ion or transfer by a sett lor to an irrevocable trust sha ll be
exempt from the requirements of the act. ")
2. 	The later acquisition by Trust of the remaining 35% via tender offer is exempt as an intraperson transfer under
802.30.
3. 	Should A or B or an yone el se ev er receive shares via dissol ution of Trust, those w ou ld be considered acquisitions
and potent ially subject to the HSR Act, wi th the assessment to be made at that t ime.
In theory another possibil it y is that the trust is a " un it trust " and therefore is treated as a non-corporate ent it y for HSR
Act purposes. We do not th ink that w ou ld affect the ul timate ana ly sis , how ever:
1. 	A w ould be the UPE of Trust by vi rtue of its ri ght to 65% of the profits of Trust and 65% of i ts assets on
dissol ution.
2. 	B's acquisit ion of Trust Uni ts (35 %) w ou ld be exempt because the acquisiti on w ou ld not confer contro l over
Trust in terms of having the right to 50% or more of the profits of trust or the ri ght to 50% or more of the assets
of Trust on dissolution.
3. 	The acqu is i tion of 65% of the v ot ing securities of Corporati on by Trust w ou ld be exempt because A (Trust's UPE )
already ho lds those v ot ing securit ies.
4. 	The later acquisition by Trust (the UPE of w hich w ou ld be A, which is also the UPE of Corporation ) of the
remaining 35% via tender offer w ould be exempt as an intraperson transfer under 802.30.
5. 	Should A or B or an yone el se ev er receive shares via dissol ution of Trust, those w ou ld be considered acquisitions
and potent ially subject to the HSR Act, wi th the assessment to be made at that t ime.
6. 	Acquisitions of Trust Units w ould be potent ially subject to the HSR Act and w ou ld need to be considered
individua ll y, although no such acquisiti on w ou ld be reportable unl ess, at a mi nimum , the acquiring person w ou ld
as a result of the acquisiti on have the right to 50% or more of the profits of trust or the right to 50% or more of
the assets of Trust on dissol ut ion.
Please l et us know ho w the PNO w ould view this transaction (w hether under the first analysis, the unit trust analysis, or
in some other w ay). If y ou need more i nformat ion to compl ete y our assessment, please do not hesitate to ask.
Thank you as a lw ays for y our assistance
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