2

such a vote would not in and of itself cause Fund A to be instrumental in the buyback.  See Informal Interpretation

#1901001 (January 29, 2019) reproduced below.

  

There is also a chance that the stockholders of X could be asked to vote to approve some of X’s buybacks from some of

the selling stockholders, but it is not yet certain whether any such vote will occur.

  

Questions

Do you agree that even if Mr. A votes as a director in favor of X’s purchases from the selling stockholders,

Fund A would not necessarily be deemed instrumental in causing these buybacks?  See Informal

Interpretation #1901001 below.

If Mr. A’s affirmative vote as a director standing alone could make Fund A instrumental, do you agree that

Fund A would not be instrumental if Mr. A abstains from voting as a director for the buybacks?

Do you agree that if X’s stockholders (including Fund A) actually vote for any of the buybacks, Fund A would

not necessarily be deemed instrumental in causing these buybacks?  See Informal Interpretation

#1901001 below.

If not, do you agree that Fund A would not be instrumental if it abstains from voting as a stockholder for the

buybacks?

Mr. Y

  

Although Mr. Y is a minority stockholder in X, he is X’s UPE because he has the right to designate at least 50% of X’s

directors.   Mr. Y is also a director of X and is X’s CEO.  He holds X voting shares with a value in excess of $92 million and

his percentage of X’s voting shares will increase when the Company buys the shares to be sold by the selling

stockholders as described above.

  

Like Fund A, Mr. Y did not try to persuade the selling stockholders to sell their shares.  Upon learning that the selling

stockholders intended to sell some of their shares, however, he was involved in the Company’s decision to repurchase

the shares and also to enter into the repurchase agreements with the selling stockholders.

  

For all the reasons described above and in the informal interpretation reproduced below, we do not believe that Mr. Y is

instrumental in causing the selling stockholders to sell their shares and his involvement in deciding that the Company

should acquire shares from the selling stockholders, with its unintended consequence of causing the percentage of

voting shares he holds in X to increase, should not result in him being deemed instrumental and having an advance HSR

filing obligation.

  

Do you agree?

  

Thanks for your help.

  

  

  

  

1901001 Informal Interpretation

  

QUESTION

From: Carson, Timothy

Sent: Tuesday, January 29, 2019 3:15:11 PM (UTC‐05:00) Eastern Time (US & Canada)
3

To: [Redacted]

Cc: [Redacted]

Subject: RE: Inquiry re: Instrumentality in Redemption/Relinquishment

The facts shared in your email do not necessarily demonstrate that Investor A is instrumental. If investigated, the agency

would look at the totality of the circumstances, so Investor A will need to make the call and be prepared to defend that

it in fact was not instrumental.

From: [Redacted]

Sent: Tuesday, January 29, 2019 8:01:03 AM (UTC‐05:00) Eastern Time (US & Canada)

To: [Redacted]

Subject: Inquiry re: Instrumentality in Redemption/Relinquishment

Dear PNO,

We are analyzing a transaction that involves a redemption of shares from a current member of an LLC who is departing

the company. As background, this would more accurately be described as a relinquishment given the circumstances of

the redemption and the nominal consideration being paid for the redeemed shares. Regardless, the transaction will

have the unintended consequence of increasing the interests of Investor A, which currently holds 49.9% of the economic

interests of the LLC, to 50% or more. Investor A is the only holder of Preferred LLC Units, and under the LLC Agreement,

a repurchase or redemption of equity interests requires the written consent of a majority in interest of the Preferred

Members. Therefore, a redemption currently cannot be effectuated without Investor A’s approval. Our question is

whether Investor A is “instrumental” by virtue of this provision in the agreement in causing the

redemption/relinquishment of LLC units by the soon‐to‐be former member of the LLC.

We have received previous guidance from PNO (copied below) indicating that a transaction in which shareholder action

was necessary to effect the percentage interest increase did not necessarily make the shareholder instrumental such

that the transaction was reportable. In that case, two shareholders were the only members of the board of directors of a

company and had to sign a settlement dispute agreement which ultimately resulted in their percentage interest in the

company increasing. Similar to that matter, the HSR reportability issue here is a by‐product of an event outside of

Investor A’s control, and Investor A is in no way causing the redemption, even if their action is ultimately necessary for

the transaction to occur. In this example, management of the LLC and the soon‐to‐be departing member are driving the

redemption, not Investor A.

Because the increase in Investor A’s percentage holdings is solely caused by the redemption and the entity is not

acquiring any additional interests, we do not consider Investor A to be instrumental in the redemption such that a filing

is required. Please let us know if you agree with this assessment or if we can answer any further questions.