4988 Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 

1 15 U.S.C. 18a(a). See Pub. L. 106–553, 114 Stat. 

2762. 2 43 FR 33487 (July 31, 1978).

FEDERAL TRADE COMMISSION

16 CFR Parts 801, 802 and 803

Premerger Notification; Reporting and 

Waiting Period Requirements

AGENCY: Federal Trade Commission.

ACTION: Final rule.

SUMMARY: The Commission is amending 

the premerger notification rules (‘‘the 

rules’’) to reflect adjustment and 

publication of reporting thresholds as 

required by the 2000 amendments 1 to 

Section 7A of the Clayton Act, 15 U.S.C. 

18a, as added by the Hart-Scott-Rodino 

Antitrust Improvements Act of 1976, 

Public Law 94–935, 90 Stat. 1390 (‘‘the 

Act.’’). The Act requires all persons 

contemplating certain mergers or 

acquisitions, which meet or exceed the 

jurisdictional thresholds in the Act, to 

file notification with the Federal Trade 

Commission (‘‘the Commission’’) and 

the Assistant Attorney General in charge 

of the Antitrust Division of the 

Department of Justice (‘‘the Assistant 

Attorney General’’) and to wait a 

designated period of time before 

consummating such transactions. The 

reporting and waiting period 

requirements are intended to enable 

these enforcement agencies to determine 

whether a proposed merger or 

acquisition may violate the antitrust 

laws if consummated and, when 

appropriate, to seek a preliminary 

injunction in Federal court to prevent 

consummation.

DATES: These final rules are effective 

March 2, 2005.

FOR FURTHER INFORMATION CONTACT:

Marian R. Bruno, Assistant Director, 

Karen E. Berg, Attorney, Malcolm L. 

Catt, Attorney, B. Michael Verne, 

Compliance Specialist, or Nancy M. 

Ovuka, Compliance Specialist, 

Premerger Notification Office, Bureau of 

Competition, Room 303, Federal Trade 

Commission, Washington, DC 20580. 

Telephone: (202) 326–3100.

SUPPLEMENTARY INFORMATION: 

Statement of Basis and Purpose 

The 2000 amendments to section 7A 

require the Commission to revise the 

Act’s jurisdictional and filing fee 

thresholds annually, based on the 

change in gross national product, in 

accordance with section 8(a)(5) for each 

fiscal year beginning after September 30, 

2004. The Commission, with the 

concurrence of the Assistant Attorney 

General, is adopting these final rules to 

reflect the revised thresholds in the 

examples contained in the rules and to 

provide a method for future adjustments 

as required by the 2000 amendments. 

These final rules will also adjust 

references to the notification and filing 

fee thresholds and other limitations in 

the rules and the Antitrust 

Improvements Act Notification and 

Report Form and its Instructions to 

remain consistent with the revised 

jurisdictional and filing fee thresholds. 

The Commission notes that the 

effective date of the new thresholds 

does not affect or void the waiting 

period expressly required under section 

7A(b)(1) of the Act, which provides that 

the waiting period shall begin with the 

date the Commission and the Antitrust 

Division of the Department of Justice 

(collectively ‘‘the Agencies’’) receive the 

filing, and shall not end until thirty 

days after that date, absent early 

termination under section 7A(b)(2). 

Accordingly, the 30-day statutory 

waiting period shall continue to apply 

to all proposed transactions filed with 

the Agencies for review, even in cases 

where the Agencies receive a filing 

before the effective date of the new 

thresholds but the waiting period for 

that filing does not expire until after 

that date. 

Implementing the Threshold Changes in 

Examples to the Rules 

Rather than attempt to revise the 

examples annually, a parenthetical ‘‘(as 

adjusted)’’ has been added where 

necessary throughout the rules to notify 

the filer where such a change in 

statutory threshold value occurs. The 

term ‘‘as adjusted’’ is then defined in 

new subsection 801.1(m) and refers to a 

table of the adjusted values published in 

the Federal Register notice titled 

‘‘Revised Jurisdictional Thresholds for 

Section 7A of the Clayton Act.’’ The 

notice will also contain a table showing 

adjusted values for the rules. This 

Federal Register notice will be 

published in January of each year and 

the values contained therein will be 

effective as of the effective date 

published in the Federal Register notice 

and will remain effective until 

superceded in the next calendar year. 

The notice will also be available at 

http://www.ftc.gov. For ease of 

application, such adjusted values will 

be rounded up to the next highest 

$100,000. 

In addition to the revisions to the 

examples throughout the rules as a 

result of the mandatory adjustments to 

the thresholds in the Act, the 

Commission will adjust the notification 

thresholds and certain limitations 

contained in the exemptions as 

discussed below. The notification 

thresholds and other limitations will be 

implemented in the same way as in the 

changes to the examples as discussed 

above (i.e. by adding the parenthetical 

‘‘(as adjusted)’’ following the relevant 

threshold or limitation). 

Non-Mandatory Revisions 

Section 801.1(h) Definition of 

Notification Threshold

The HSR statute provides that an 

acquisition is reportable if, as a result of 

the acquisition, the acquirer will hold 

voting securities of the acquired person 

valued in excess of $50 million. Under 

the statute, once an acquirer holds 

voting securities valued at more than 

$50 million, any additional purchase of 

even one voting share is reportable. As 

the antitrust agencies recognized in the 

original rulemaking proceeding in 

1978,2 this provision would result in far 

more filings than are needed for 

effective antitrust review. At the same 

time, as the acquirer’s holding in the 

company continue to increase in size 

through subsequent transactions, the 

agencies must have some opportunities 

to review the later transactions. That is, 

there must be some points (thresholds) 

where these additional acquisitions 

become reportable.

Section 801.1(h) defines the term 

‘‘notification threshold’’ and sets forth 

five reporting thresholds. Failing to 

adjust these thresholds to correspond to 

adjusted thresholds for filing fees would 

create two different sets of thresholds, 

one for fees and another for notification 

requirements, creating confusion and 

difficult administrative problems. 

Therefore, the notification thresholds 

will be adjusted annually to correspond 

to the adjusted filing fee thresholds. 

Although adjustment of the $1 billion 

limitation associated with the 25 

percent threshold is not mandated on 

this basis, this limitation will also be 

adjusted annually, by the same 

percentage as the other notification 

thresholds, in order to avoid its 

eventually coming too close to the $500 

million notification threshold as it is 

adjusted. The Commission believes that 

such changes are consistent with 

Congressional intent and with 

encouraging efficient antitrust review. 

Section 801.40 Formation of Joint 

Venture or Other Corporations 

Section 801.40 provides a special 

size-of-person test in the formation of 

new corporations. The values used to 

determine whether the transaction 

satisfies this test are the same as the 

jurisdictional size-of-person thresholds 

Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 4989

3 67 FR 11898 (March 18, 2002)

4See Pub. L. 106–553, 114 Stat. 2762.

5FY 2003 is the latest fiscal year for which 

statistics have been published in the Annual Report 

to Congress.

and will therefore be adjusted to remain 

identical to them. 

Section 802.4 Acquisitions of Voting 

Securities of Issuers Holding Certain 

Assets the Direct Acquisition of Which 

Is Exempt 

Section 802.4 exempts the acquisition 

of voting securities of issuers that hold 

certain assets the direct acquisition of 

which is exempt under the act or the 

rules, and do not hold other non-exempt 

assets with an aggregate fair market 

value of more than $50 million. The 

rationale for this rule is that the 

applicability of an exemption should 

not depend on the form the acquisition 

takes, since the antitrust analysis would 

be the same whether voting securities or 

assets are being acquired. The statute 

does not mandate adjustment to this $50 

million limitation. However, since this 

threshold functions in the same manner 

as the size-of-transaction test in an asset 

acquisition, this limitation is adjusted to 

remain consistent with mandated 

adjustments to the $50 million 

jurisdictional threshold. 

Section 802.21 Acquisitions of Voting 

Securities Not Meeting or Exceeding 

Greater Notification Threshold (as 

Adjusted) 

The annual adjustment of notification 

thresholds can make it difficult for filing 

parties to determine which notification 

thresholds are applicable for purposes 

of this exemption. For example, where 

a notification threshold increases after a 

party files but before a year has passed, 

a question may arise as to whether the 

notification threshold in place at the 

time it filed or the adjusted notification 

threshold would apply. Section 802.21 

is amended to provide an acquiring 

person with a one year period to reach 

the notification threshold in place at the 

time that they filed, even though the 

notification threshold may have 

subsequently been adjusted during that 

year. Note, however, that an acquiring 

person may then acquire up to the next 

greater adjusted notification threshold 

(as opposed to the next notification 

threshold in place at the time of filing) 

during the five years following 

expiration of the waiting period. This is 

illustrated in two new examples to 

section 802.21. 

Sections 802.50 and 802.51

Acquisitions of Foreign Assets or Voting 

Securities of a Foreign Issuer 

The adjustment statute does not 

require adjustment of the limitations 

contained in sections 802.50 and 802.51 

regarding acquisitions of foreign assets 

and voting securities. The Commission 

nonetheless is amending the rules to 

make such adjustments, inasmuch as 

the Commission has previously 

amended these limitations to 

correspond to changes to thresholds in 

the Act. For example, in 2002,3 the 

Commission amended the limitations in 

these sections by adopting the $50 

million size-of-transaction threshold 

established in the 2000 amendments to 

the act.4 In doing so, the Commission 

noted that the principle underlying 

sections 802.50 and 802.51 was that the 

acquisitions of foreign assets or voting 

securities should not be subject to the 

reporting requirements unless the assets 

or voting securities being acquired have 

sufficient impact on U.S. commerce. 

The Commission noted that the $50 

million threshold amount established in 

the 2000 legislation provided an 

appropriate measure of such an impact. 

The Commission also referenced the 

1978 SBP which explained that the $110 

million limitation contained in the 

sections was adopted to approximate 

the size-of-person criteria of the act. 

Therefore, the $50 million limitations in 

these exemptions will be adjusted 

annually to remain in sync with the 

adjusted size-of-transaction threshold. 

Similarly, the $110 million limitation 

on combined U.S. sales or assets of the 

acquiring and acquired person will be 

adjusted in sync with the annual 

adjustments to the size-of-person test 

amounts.

Appendix: Premerger Notification and 

Report Form 

Item 2(c) of the Form and Instructions 

requires the acquiring person to indicate 

the notification threshold that it will 

meet or exceed in an acquisition of 

voting securities. This item will be 

amended to add ‘‘(as adjusted)’’ to the 

appropriate notification thresholds on 

the Form and in the Instructions. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601–612, requires that the agency 

conduct an initial and final regulatory 

analysis of the anticipated economic 

impact of the proposed amendments on 

small businesses, except where the 

Commission certifies that the regulatory 

action will not have a significant 

economic impact on a substantial 

number of small entities. 5 U.S.C. 605. 

Because of the size of the transactions 

necessary to invoke a Hart-Scott-Rodino 

filing, the premerger notification rules 

rarely, if ever, affect small businesses. 

Indeed, the 2000 amendments to the Act 

were intended to reduce the burden of 

the premerger notification program by 

exempting all transactions valued at $50 

million or less. Further, none of the 

proposed rule amendments expands the 

coverage of the premerger notification 

rules in a way that would affect small 

business. Accordingly, the Commission 

certifies that these proposed rules will 

not have a significant economic impact 

on a substantial number of small 

entities. This document serves as the 

required notice of this certification to 

the Small Business Administration.

Paperwork Reduction Act 

Paperwork Reduction Act of 1995, 44 

U.S.C. 3501–3518, requires agencies to 

submit requirements for ‘‘collections of 

information’’ to the Office of 

Management and Budget (‘‘OMB’’) and 

obtain clearance prior to instituting 

them. Such collections of information 

include reporting, recordkeeping, or 

disclosure requirements contained in 

regulations. The HSR premerger 

notification rules and Form contain 

information collection requirements, as 

defined by the Paperwork Reduction 

Act, that have been reviewed and 

approved by the Office of Management 

and Budget under OMB Control No. 

3084–0005 through May 31, 2007. As 

noted earlier, these final rules 

implement amendments to Section 7A 

of the Clayton Act that require annual 

adjustments to the jurisdictional 

thresholds. 

There were 1,104 transactions 

requiring notification in FY 2003. FTC 

staff estimates that 45 of these 

transactions would not have required 

notification had the thresholds been 

adjusted by the average percentage 

change in the gross national product 

over the fifteen years that the thresholds 

in Section 8 have been annually 

adjusted. Generally, each transaction 

involves two filings (because each party 

to the transaction is required to file). 

The existing OMB clearance is premised 

on the staff’s estimate that each of these 

filings requires 39 hours to complete. 

Accordingly, staff estimates that the 

final rule changes will result in a 

reduction in the hours burden of 3,510 

hours per year (45 transactions × 2) × 39 

hours. This estimate is based on fiscal 

year 2003 filings,5 and constitutes 

approximately a 4% reduction from the 

previous burden estimate of 87,530 

hours. Thus, the total burden hours 

under the HSR rules as revised will be 

84,020 hours. Similarly, staff estimates 

the total labor costs under the final rules 

to be $35,708,000 (rounded to the 

nearest thousand), a decrease of 

4990 Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 

6The reduction of approximately $1,492,000 in 

labor costs is based on an estimated average of $425 

per hour for executives’ and attorneys’ wages (3,510 

hours × $425/hour = $1,491,750).

$1,492,000 from the previous estimate 

of $37,200,000.6

On January 11, 2005, the Office of 

Management and Budget approved the 

new burden estimates resulting from 

these final rule changes. 

Administrative Procedure Act 

These final amendments are technical 

and non-substantive, to the extent they 

make conforming rule changes that 

merely incorporate by reference the 

adjusted filing thresholds to be 

published elsewhere in the Federal 

Register, or merely clarify the 

application of the existing rules under 

the adjusted thresholds, without 

amending the existing rules in any other 

way. Accordingly, the Commission has 

determined that these amendments are 

not subject to the public notice and 

comment procedures of the 

Administrative Procedure Act. See 5 

U.S.C. 553(b)(A).

List of Subjects in 16 CFR Parts 801, 

802 and 803 

Antitrust.

■ For the reasons stated in the preamble, 

the Federal Trade Commission amends 

16 CFR parts 801, 802 and 803 as set 

forth below:

PART 801—COVERAGE RULES

■ 1. The authority citation for part 801 

continues to read as follows:

Authority: 15 U.S.C. 18a(d).

■ 2. Amend § 801.1 by revising 

paragraph (h) and adding paragraph (n) 

to read as follows:

§ 801.1 Definitions.

* * * * *

(h) Notification threshold. The term 

‘‘notification threshold’’ means: 

(1) An aggregate total amount of 

voting securities of the acquired person 

valued at greater than $50 million (as 

adjusted) but less than $100 million (as 

adjusted); 

(2) An aggregate total amount of 

voting securities of the acquired person 

valued at $100 million (as adjusted) or 

greater but less than $500 million (as 

adjusted); 

(3) An aggregate total amount of 

voting securities of the acquired person 

valued at $500 million (as adjusted) or 

greater; 

(4) Twenty-five percent of the 

outstanding voting securities of an 

issuer if valued at greater than $1 billion 

(as adjusted); or 

(5) Fifty percent of the outstanding 

voting securities of an issuer if valued 

at greater than $50 million (as adjusted).

* * * * *

(n) (as adjusted). The parenthetical 

‘‘(as adjusted)’’ refers to the adjusted 

values published in the Federal Register

notice titled ‘‘Revised Jurisdictional 

Threshold for Section 7A of the Clayton 

Act.’’ This Federal Register notice will 

be published in January of each year 

and the values contained therein will be 

effective as of the effective date 

published in the Federal Register notice 

and will remain effective until 

superseded in the next calendar year. 

The notice will also be available at 

http://www.ftc.gov. Such adjusted 

values will be calculated in accordance 

with Section 7A(a)(2)(A) and will be 

rounded up to the next highest 

$100,000.

■ 3. Amend § 801.2(d) by revising 

Examples 2 and 3; by removing Example 

4; and by redesignating Example 5 as 

Example 4 to read as follows.

§ 801.2 Acquiring and acquired persons.

* * * * *

(d) * * *

Examples:

* * * * *

2. In the above example, suppose the 

consideration for Y consists of $8 million 

worth of the voting securities of A. With 

regard to the transfer of this consideration, 

‘‘B’’ is an acquiring person because it will 

hold voting securities it did not previously 

hold, and ‘‘A’’ is an acquired person because 

its voting securities will be held by B. Since 

these voting securities are worth less than 

$50 million (as adjusted), the acquisition of 

these securities is not reportable. ‘‘A’’ will 

therefore report as an acquiring person only 

and ‘‘B’’ as an acquired person only. 

3. In the above example, suppose that, as 

consideration for Y, A transfers to B a 

manufacturing plant valued in excess of $50 

million (as adjusted). ‘‘B’’ is thus an 

acquiring person and ‘‘A’’ an acquired person 

in a reportable acquisition of assets. ‘‘A’’ and 

‘‘B’’ will each report as both an acquiring and 

an acquired person in this transaction 

because each occupies each role in a 

reportable acquisition.

* * * * *

■ 4. Amend § 801.4(b) by revising 

Examples 1 and 5 to read as follows:

§ 801.4 Secondary acquisitions.

* * * * *

(b) * * *

Examples:

1. Assume that acquiring person ‘‘A’’

proposes to acquire all the voting securities 

of corporation B. This section provides that 

the acquisition of voting securities of issuers 

held but not controlled by B or by any entity 

which B controls are secondary acquisitions 

by ‘‘A.’’ Thus, if B holds more than $50 

million (as adjusted) of the voting securities 

of corporation X (but does not control X), and 

‘‘A’’ and ‘‘X’’ satisfy Sections 7A (a)(1) and 

(a)(2), ‘‘A’’ must file notification separately 

with respect to its secondary acquisition of 

voting securities of X. ‘‘X’’ must file 

notification within fifteen days (or in the case 

of a cash tender offer, 10 days) after ‘‘A’’ files, 

pursuant to § 801.30.

* * * * *

5. In previous Example 4, suppose the 

consideration paid by A for the acquisition 

of B is in excess of $50 million (as adjusted) 

worth of the voting securities of A. By virtue 

of § 801.2(d)(2), ‘‘A’’ and ‘‘B’’ are each both 

acquiring and acquired persons. A will still 

be deemed to have acquired control of B, and 

therefore the resulting acquisition of the 

voting securities of X is a secondary 

acquisition. Although ‘‘B’’ is now also an 

acquiring person, unless B gains control of A 

in the transaction, B still makes no secondary 

acquisitions of stock held by A. If the 

consideration paid by A is the voting 

securities of one of A’s subsidiaries and B 

thereby gains control of that subsidiary, B 

will make secondary acquisitions of any 

minority holdings of that subsidiary.

* * * * *

■ 5. Amend § 801.11(e) by revising 

Examples 1, 3 and 4 to read as follows:

§ 801.11 Annual net sales and total assets.

* * * * *

(e) * * *

Examples: ***

1. A will borrow $105 million in cash and 

will purchase assets from B for $100 million. 

In order to establish whether A’s acquisition 

of B’s assets is reportable, A’s total assets are 

determined by subtracting the $100 million 

that it will use to acquire B’s assets from the 

$105 million that A will have at the time of 

the acquisition. Therefore, A has total assets 

of less than $10 million (as adjusted) and 

does not meet any size-of-person test of 

Section 7A(a)(2).

* * * * *

3. Assume that company A will make a 

$150 million acquisition and that it must pay 

a loan origination fee of $5 million. A 

borrows $161 million. A does not meet the 

size-of-person test in Section 7A(a)(2) 

because its total assets are less than $10 

million (as adjusted). $150 million is 

excluded because it will be consideration for 

the acquisition and $5 million is excluded 

because it is an expense incidental to the 

acquisition. Therefore, A is only a $6 million 

person. Note that if A were making an 

acquisition valued at over $200 million (as 

adjusted), the acquisition would be 

reportable without regard to the sizes of the 

persons involved. 

4. Assume that ‘‘A’’ borrows $195 million 

to acquire $100 million of assets from ‘‘B’’

and $60 million of voting securities of ‘‘C.’’

The balance of the loan will be used for 

working capital. To determine its size for 

purposes of its acquisition from ‘‘B,’’ ‘‘A’’

subtracts the $100 million that it will use for 

that acquisition. Therefore, A has total assets 

of $95 million for purposes of its acquisition 

from ‘‘B.’’ To determine its size with respect 

Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 4991

to its acquisition from ‘‘C,’’ ‘‘A’’ subtracts the 

$60 million that will be paid for ‘‘C’s’’ voting 

securities. Thus, for purposes of its 

acquisition from ‘‘C’’, ‘‘A’’ has total assets of 

$135 million. In the first acquisition ‘‘A’’

meets the $10 million (as adjusted) size-ofperson test and in the second acquisition ‘‘A’’

meets the $100 million (as adjusted) size-ofperson test of Section 7A(a)(2).

■ 6. Amend § 801.13(a) by revising 

Examples 1 and 4 to read as follows:

§ 801.13 Voting securities or assets to be 

held as a result of acquisition.

* * * * *

(a) * * *

Examples:

1. Assume that acquiring person ‘‘A’’ holds 

in excess of $50 million (as adjusted) of the 

voting securities of X, and is to acquire 

another $1 million of the same voting 

securities. Since under paragraph (a) of this 

section all voting securities ‘‘A’’ will hold 

after the acquisition are held ‘‘as a result of’’

the acquisition, ‘‘A’’ will hold in excess of 

$50 million (as adjusted) of the voting 

securities of X as a result of the acquisition. 

‘‘A’’ must therefore observe the requirements 

of the act before making the acquisition, 

unless the present acquisition is exempt 

under Section 7A(c), § 802.21 or any other 

rule.

* * * * *

4. On January 1, company A acquired in 

excess of $50 million (as adjusted) of voting 

securities of company B. ‘‘A’’ and ‘‘B’’ filed 

notification and observed the waiting period 

for that acquisition. Company A plans to 

acquire $1 million of assets from company B 

on May 1 of the same year. Under 

§ 801.13(a)(3), ‘‘A’’ and ‘‘B’’ do not aggregate 

the value of the earlier acquired voting 

securities to determine whether the 

acquisition is subject to the act. Therefore, 

the value of the acquisition is $1 million and 

it is not reportable.

* * * * *

■ 7. Amend § 801.14(b) by revising 

Examples 1 and 2 to read as follows:

§ 801.14 Aggregate total amount of voting 

securities and assets.

* * * * *

(b) * * *

Examples:

1. Acquiring person ‘‘A’’ previously 

acquired less than $50 million (as adjusted) 

of the voting securities (not convertible 

voting securities) of corporation X. ‘‘A’’ now 

intends to acquire additional assets of X. 

Under paragraph (a) of this section, ‘‘A’’

looks to § 801.13(a) and determines that the 

voting securities are to be held ‘‘as a result 

of’’ the acquisition. Section 801.13(a) also 

provides that ‘‘A’’ must determine the 

present value of the previously acquired 

securities. Under paragraph (b) of this 

section, ‘‘A’’ looks to § 801.13(b)(1) and 

determines that the assets to be acquired will 

be held ‘‘as a result of’’ the acquisition, and 

are valued under § 801.10(b). Therefore, if the 

voting securities have a present value which 

when combined with the value of the assets 

would exceed $50 million (as adjusted), the 

asset acquisition is subject to the 

requirements of the act since, as a result of 

it, ‘‘A’’ would hold an aggregate total amount 

of the voting securities and assets of ‘‘X’’ in 

excess of $50 million (as adjusted) .

2. In the previous example, assume that the 

assets acquisition occurred first, and that the 

acquisition of the voting securities is to occur 

within 180 days of the first acquisition. ‘‘A’’

now looks to § 801.13(b)(2) and determines 

that because the second acquisition is of 

voting securities and not assets, the asset and 

voting securities acquisitions are not treated 

as one transaction. Therefore, the second 

acquisition would not be subject to the 

requirements of the act since the value of the 

securities to be acquired does not exceed the 

$50 million (as adjusted) size-of-transaction 

test.

■ 8. Amend § 801.15(c) by revising 

Examples 1, 4, 6 and 7 to read as follows:

§ 801.15 Aggregation of voting securities 

and assets the acquisition of which was 

exempt.

* * * * *

(c) * * *

Examples:

1. Assume that acquiring person ‘‘A’’ is 

simultaneously to acquire in excess of $50 

million (as adjusted) of the convertible voting 

securities of X and less than $50 million (as 

adjusted) of the voting common stock of X. 

Although the acquisition of the convertible 

voting securities is exempt under § 802.31, 

since the overall value of the securities to be 

acquired is greater than $50 million (as 

adjusted), ‘‘A’’ must determine whether it is 

obliged to file notification and observe a 

waiting period before acquiring the 

securities. Because § 802.31 is one of the 

exemptions listed in paragraph (a)(2) of this 

section, ‘‘A’’ would not hold the convertible 

voting securities as a result of the acquisition. 

Therefore, since as a result of the acquisition 

‘‘A’’ would hold only the common stock, the 

size-of-transaction tests of Section 7A(a)(2) 

would not be satisfied, and ‘‘A’’ need not 

observe the requirements of the act before 

acquiring the common stock. (Note, however, 

that the value of the convertible voting 

securities would be reflected in ‘‘A’s’’ next 

regularly prepared balance sheet, for 

purposes of § 801.11).

* * * * *

4. Assume that acquiring person ‘‘B,’’ a 

United States person, acquired from 

corporation ‘‘X’’ two manufacturing plants 

located abroad, and assume that the 

acquisition price was in excess of $50 million 

(as adjusted). In the most recent year, sales 

into the United States attributable to the 

plants were less than $50 million (as 

adjusted), and thus the acquisition was 

exempt under § 802.50(a)(2). Within 180 days 

of that acquisition, ‘‘B’’ seeks to acquire a 

third plant from ‘‘X,’’ to which United States 

sales were attributable in the most recent 

year. Since under § 801.13(b)(2), as a result 

of the acquisition, ‘‘B’’ would hold all three 

plants of ‘‘X,’’if the $50 million (as adjusted) 

limitation in § 802.50(a)(2) would be 

exceeded, under paragraph (b) of this section, 

‘‘B’’ would hold the previously acquired 

assets for purposes of the second acquisition. 

Therefore, as a result of the second 

acquisition, ‘‘B’’ would hold assets of ‘‘X’’

exceeding $50 million (as adjusted) in value, 

would not qualify for the exemption in 

§ 802.50(a)(2), and must observe the 

requirements of the act and file notification 

for the acquisition of all three plants before 

acquiring the third plant

* * * * *

6. ‘‘X’’ acquired 55 percent of the voting 

securities of M, an entity controlled by ‘‘Z,’’

six months ago and now proposes to acquire 

50 percent of the voting stock of N, another 

entity controlled by ‘‘Z.’’ M’s assets consist 

of $150 million worth of producing coal 

reserves plus less than $50 million (as 

adjusted) worth of non-exempt assets and N’s 

assets consist of a producing coal mine worth 

$100 million together with non-exempt assets 

with a fair market value of less than $50 

million (as adjusted). ‘‘X’s’’ acquisition of the 

voting securities of M was exempt under 

§ 802.4(a) because M held exempt assets 

pursuant to § 802.3(b) and less than $50 

million (as adjusted) of non-exempt assets. 

Because ‘‘X’’ acquired control of M in the 

earlier transaction, M is now within the 

person of ‘‘X,’’ and the assets of M need not 

be aggregated with those of N to determine 

if the subsequent acquisition of N will exceed 

the limitation for coal reserves or for nonexempt assets. Since the assets of N alone do 

not exceed these limitations, ‘‘X’s’’

acquisition of N also is not reportable. 

7. In previous Example 6, assume that ‘‘X’’

acquired 30 percent of the voting securities 

of M and proposes to acquire 40 percent of 

the voting securities of N, another entity 

controlled by ‘‘Z.’’ Assume also that M’s 

assets at the time of ‘‘X’s’’ acquisition of M’s 

voting securities consisted of $90 million 

worth of producing coal reserves and nonexempt assets with a fair market value of less 

than $50 million (as adjusted), and that N’s 

assets currently consist of $60 million worth 

of producing coal reserves and non-exempt 

assets with a fair market value which when 

aggregated with M’s non-exempt assets 

would exceed $50 million (as adjusted). 

Since ‘‘X’’ acquired a minority interest in M 

and intends to acquire a minority interest in 

N, and since M and N are controlled by ‘‘Z,’’

the assets of M and N must be aggregated, 

pursuant to Secs. 801.15(b) and 801.13, to 

determine whether the acquisition of N’s 

voting securities is exempt. ‘‘X’’ is required 

to determine the current fair market value of 

M’s assets. If the fair market value of M’s coal 

reserves is unchanged, the aggregated exempt 

assets do not exceed the limitation for coal 

reserves. However, if the present fair market 

value of N’s non-exempt assets also is 

unchanged, the present fair market value of 

the non-exempt assets of M and N when 

aggregated is greater than $50 million. Thus 

the acquisition of the voting securities of N 

is not exempt. If ‘‘X’’ proposed to acquire 50 

percent or more of the voting securities of 

both M and N in the same acquisition, the 

assets of M and N must be aggregated to 

determine if the acquisition of the voting 

securities of both issuers is exempt. Since the 

fair market value of the aggregated nonexempt assets exceeds $50 million (as 

4992 Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 

adjusted), the acquisition would not be 

exempt.

* * * * *

§ 801.20 [Amended]

■ 9. Amend § 801.20(c) by removing 

Examples 1 and 2.

■ 10. Amend § 801.30(b) by revising 

Example 2 to read as follows:

§ 801.30 Tender offers and acquisitions of 

voting securities from third parties.

* * * * *

(b) * * *

Examples:

* * * * *

2. Acquiring person ‘‘A’’ proposes to 

acquire in excess of $50 million (as adjusted) 

of the voting securities of corporation X on 

a securities exchange. The waiting period 

begins when ‘‘A’’ files notification. ‘‘X’’ must 

file notification within 15 calendar days 

thereafter. The seller of the X shares is not 

subject to any obligations under the act.

* * * * *

■ 11. Amend § 801.31 by revising the 

Example to read as follows:

§ 801.31 Acquisitions of voting securities 

by offerees in tender offers.

* * * * *

Example: Assume that ‘‘A,’’ which has 

annual net sales exceeding $100 million (as 

adjusted), makes a tender offer for voting 

securities of corporation X. The 

consideration for the tender offer is to be 

voting securities of A. ‘‘S,’’ a shareholder of 

X with total assets exceeding $10 million (as 

adjusted), wishes to tender its holdings of X 

and in exchange would receive shares of A 

valued in excess of $50 million (as adjusted). 

Under this section, ‘‘S’s’’ acquisition of the 

shares of A would be an acquisition 

separately subject to the requirements of the 

act. Before ‘‘S’’ may acquire the voting 

securities of A, ‘‘S’’ must first file notification 

and observe a waiting period—which is 

separate from any waiting period that may 

apply with respect to ‘‘A’’ and ‘‘X.’’ Since 

§ 801.30 applies, the waiting period 

applicable to ‘‘A’’ and ‘‘S’’ begins upon filing 

by ‘‘S,’’ and ‘‘A’’ must file with respect to 

‘‘S’s’’ acquisition within 15 days pursuant to 

§ 801.30(b). Should the waiting period with 

respect to ‘‘A’’ and ‘‘X’’ expire or be 

terminated prior to the waiting period with 

respect to ‘‘S’’ and ‘‘A,’’ ‘‘S’’ may wish to 

tender its X-shares and place the A-shares 

into a nonvoting escrow until the expiration 

or termination of the latter waiting period.

■ 12. Amend § 801.32 by revising the 

Example to read as follows:

§ 801.32 Conversion and acquisition.

* * * * *

Example: Assume that acquiring person 

‘‘A’’ wishes to convert convertible voting 

securities of issuer X, and is to receive 

common stock of X valued in excess of $50 

million (as adjusted). If ‘‘A’’ and ‘‘X’’ satisfy 

the criteria of Section 7A(a)(1) and Section 

7A(a)(2)(B)(ii), then ‘‘A’’ and ‘‘X’’ must file 

notification and observe the waiting period 

before ‘‘A’’ completes the acquisition of the 

X common stock, unless exempted by 

Section 7A(c) or the regulations in this part. 

Since § 801.30 applies, the waiting period 

begins upon notification by ‘‘A,’’ and ‘‘X’’

must file notification within 15 days.

■ 13. Amend § 801.40 by revising 

paragraphs (c)(1) and (2) and Examples 

1 and 2 to read as follows:

§ 801.40 Formation of joint venture or 

other corporations.

* * * * *

(c) * * * 

(1)(i) The acquiring person has annual 

net sales or total assets of $100 million 

(as adjusted) or more; 

(ii) The joint venture or other 

corporation will have total assets of $10 

million (as adjusted) or more; and 

(iii) At least one other acquiring 

person has annual net sales or total 

assets of $10 million (as adjusted) or 

more; or 

(2)(i) The acquiring person has annual 

net sales or total assets of $10 million 

(as adjusted) or more; 

(ii) The joint venture or other 

corporation will have total assets of 

$100 million (as adjusted) or more; and 

(iii) At least one other acquiring 

person has annual net sales or total 

assets of $10 million (as adjusted) or 

more.

* * * * *

Examples:

1. Persons ‘‘A,’’ ‘‘B,’’ and ‘‘C’’ agree to 

create new corporation ‘‘N,’’ a joint venture. 

‘‘A,’’ ‘‘B,’’ and ‘‘C’’ will each hold one third 

of the shares of ‘‘N.’’ ‘‘A’’ has more than $100 

million (as adjusted) in annual net sales. ‘‘B’’

has more than $10 million (as adjusted) in 

total assets but less than $100 million (as 

adjusted) in annual net sales and total assets. 

Both ‘‘C’s’’ total assets and its annual net 

sales are less than $10 million (as adjusted). 

‘‘A,’’ ‘‘B,’’ and ‘‘C’’ are each engaged in 

commerce. ‘‘A,’’ ‘‘B,’’ and ‘‘C’’ have agreed to 

make an aggregate initial contribution to the 

new entity of $18 million in assets and each 

to make additional contributions of $21 

million in each of the next three years. Under 

paragraph (d) of this section, the assets of the 

new corporation are $207 million. Under 

paragraph (c) of this section, ‘‘A’’ and ‘‘B’’

must file notification. Note that ‘‘A’’ and ‘‘B’’

also meet the criterion of Section 

7A(a)(2)(B)(i) since they will be acquiring one 

third of the voting securities of the new 

entity for in excess of $50 million (as 

adjusted). N need not file notification; see 

§ 802.41. 

2. In the preceding example ‘‘A’’ has over 

$10 million (as adjusted) but less than $100 

million (as adjusted) in sales and assets, ‘‘B’’

and ‘‘C’’ have less than $10 million (as 

adjusted) in sales and assets. ‘‘N’’ has total 

assets of $500 million. Assume that ‘‘A’’ will 

acquire 50 percent of the voting securities of 

‘‘N’’ and ‘‘B’’ and ‘‘C’’ will each acquire 25 

percent. Since ‘‘A’’ will acquire in excess of 

$200 million (as adjusted) in voting securities 

of ‘‘N’’, the size-of-person test in § 801.40(c) 

is inapplicable and ‘‘A’’ is required to file 

notification.

■ 14. Amend 801.90 by revising 

Examples 1 and 2 to read as follows:

§ 801.90 Transactions or devices for 

avoidance.

* * * * *

Examples:

1. Suppose corporations A and B wish to 

form a joint venture. A and B contemplate a 

total investment of over $100 million (as 

adjusted) in the joint venture; persons ‘‘A’’

and ‘‘B’’ each have total assets in excess of 

$100 million (as adjusted). Instead of filing 

notification pursuant to § 801.40, A creates a 

new subsidiary, A1, which issues half of its 

authorized shares to A. Assume that A1 has 

total assets of $3000. ‘‘A’’ then sells 50 

percent of its A1 stock to ‘‘B’’ for $1500. 

Thereafter, ‘‘A’’ and ‘‘B’’ each contribute in 

excess of $50 million (as adjusted) to A1 in 

exchange for the remaining authorized A1 

stock (one-fourth each to ‘‘A’’ and ‘‘B’’). A’s 

creation of A1 was exempt under Sec. 802.30; 

its $1500 sale of A1 stock to ‘‘B’’ did not meet 

the size-of-transaction filing threshold in 

Section 7A(a)(2)(B); and the second 

acquisition of stock in A1 by ‘‘A’’ and ‘‘B’’

was exempt under § 802.30 and Sections 

7A(c)(3) and (10). Since this scheme appears 

to be for the purpose of avoiding the 

requirements of the act, the sequence of 

transactions will be disregarded. The 

transactions will be viewed as the formation 

of a joint venture corporation by ‘‘A’’ and 

‘‘B’’ having over $10 million (as adjusted) in 

assets. Such a transaction would be covered 

by § 801.40 and ‘‘A’’ and ‘‘B’’ must file 

notification and observe the waiting period. 

2. Suppose ‘‘A’’ wholly owns and operates 

a chain of twenty retail hardware stores, each 

of which is separately incorporated and has 

assets of less than $10 million. The aggregate 

fair market value of the assets of the twenty 

store corporations is in excess of $50 million 

(as adjusted). ‘‘A’’ proposes to sell the stores 

to ‘‘B’’ for in excess of $50 million (as 

adjusted). For various reasons it is decided 

that ‘‘B’’ will buy the stock of each of the 

store corporations from ‘‘A.’’ Instead of filing 

notification and observing the waiting period 

as contemplated by the act, ‘‘A’’ and ‘‘B’’

enter into a series of five stock purchase-sale 

agreements for $12 million each. Under the 

terms of each contract, the stock of four 

stores will pass from ‘‘A’’ to ‘‘B’’. The five 

agreements are to be consummated on five 

successive days. Because after each of these 

transactions the store corporations are no 

longer part of the acquired person 

(§ 801.13(a) does not apply because control 

has passed, see § 801.2), and because $12 

million is below the size-of-transaction filing 

threshold of Section 7A(a)(2)(B), none of the 

contemplated acquisitions would be subject 

to the requirements of the act. However, if 

the stock of all of the store corporations were 

to be purchased in one transaction, no 

exemption would be applicable, and the act’s 

requirements would have to be met. Because 

it appears that the purpose of making five 

separate contracts is to avoid the 

Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 4993

requirements of the act, this section would 

ignore the form of the separate transactions 

and consider the substance to be one 

transaction requiring compliance with the 

act.

PART 802—EXEMPTION RULES

■ 15. The authority citation for part 802 

continues to read as follows:

Authority: 15 U.S.C. 18a(d).

■ 16. Amend § 802.1 by revising 

Examples 1 through 7, 9 and 10, to read 

as follows:

§ 802.1 Acquisitions of goods and realty in 

the ordinary course of business.

* * * * *

Examples:

1. Greengrocer Inc. intends to sell to ‘‘A’’

all of the assets of one of the 12 grocery stores 

that it owns and operates throughout the 

metropolitan area of City X. Each of 

Greengrocer’s stores constitutes an operating 

unit, i.e., a business undertaking in a 

particular location. Thus ‘‘A’s’’ acquisition is 

not exempt as an acquisition in the ordinary 

course of business. However, the acquisition 

will not be subject to the notification 

requirements if the acquisition price or fair 

market value of the store’s assets does not 

exceed $50 million (as adjusted). 

2. ‘‘A,’’ a manufacturer of airplane engines, 

agrees to pay in excess of $50 million (as 

adjusted) to ‘‘B,’’ a manufacturer of airplane 

parts, for certain new engine components to 

be used in the manufacture of airplane 

engines. The acquisition is exempt under 

§ 802.1(b) as new goods as well as under 

§ 802.1(c)(3) as current supplies. 

3. ‘‘A,’’ a power generation company, 

proposes to purchase from ‘‘B,’’ a coal 

company, in excess of $50 million (as 

adjusted) of coal under a long-term contract 

for use in its facilities to supply electric 

power to a regional public utility and steam 

to several industrial sites. This transaction is 

exempt under § 802.1(c)(2) as an acquisition 

of current supplies. However, if ‘‘A’’

proposed to purchase coal reserves rather 

than enter into a contract to acquire output 

of a coal mine, the acquisition would not be 

exempt as an acquisition of goods in the 

ordinary course of business. The acquisition 

may still be exempt pursuant to § 802.3(b) as 

an acquisition of reserves of coal if the 

requirements of that section are met. 

4. ‘‘A,’’ a national producer of canned fruit, 

preserves, jams and jellies, agrees to purchase 

from ‘‘B’’ for in excess of $50 million (as 

adjusted) a total of 20,000 acres of orchards 

and vineyards in several locations 

throughout the U.S. ‘‘A’’ plans to harvest the 

fruit from the acreage for use in its canning 

operations. The acquisition is not exempt 

under § 802.1 because orchards and 

vineyards are real property, not ‘‘goods.’’ If, 

on the other hand, ‘‘A’’ had contracted to 

acquire from ‘‘B’’ the fruit and grapes 

harvested from the orchards and vineyards, 

the acquisition would qualify for the 

exemption as an acquisition of current 

supplies under § 802.1(c)(3). Although the 

transfer of orchards and vineyards is not 

exempt under § 802.1, the acquisition would 

be exempt under § 802.2(g) as an acquisition 

of agricultural property. 

5. ‘‘A,’’ a railcar leasing company, will 

purchase in excess of $50 million (as 

adjusted) of new railcars from a railcar 

manufacturer in order to expand its existing 

fleet of cars available for lease. The 

transaction is exempt under § 802.1(b) as an 

acquisition of new goods and § 802.1(c), as an 

acquisition of current supplies. If ‘‘A’’

subsequently sells the railcars to ‘‘C,’’ a 

commercial railroad company, that 

acquisition would be exempt under 

§ 802.1(d)(2), provided that ‘‘A’’ acquired and 

held the railcars solely for resale or leasing 

to an entity not within itself. 

6. ‘‘A,’’ a major oil company, proposes to 

sell two of its used oil tankers for in excess 

of $50 million (as adjusted) to ‘‘B,’’ a dealer 

who purchases oil tankers from the major 

U.S. oil companies. ‘‘B’s’’ acquisition of the 

used oil tankers is exempt under § 802.1(d)(1) 

provided that ‘‘B’’ is actually acquiring 

beneficial ownership of the used tankers and 

is not acting as an agent of the seller or 

purchaser. 

7. ‘‘A,’’ a cruise ship operator, plans to sell 

for in excess of $50 million (as adjusted) one 

of its cruise ships to ‘‘B,’’ another cruise ship 

operator. ‘‘A’’ has, in good faith, executed a 

contract to acquire a new cruise ship with 

substantially the same capacity from a 

manufacturer. The contract specifies that ‘‘A’’

will receive the new cruise ship within one 

month after the scheduled date of the sale of 

its used cruise ship to ‘‘B.’’ Since ‘‘B’’ is 

acquiring a used durable good that ‘‘A’’ has 

contracted to replace within six months of 

the sale, the acquisition is exempt under 

§ 802.1(d)(3).

* * * * *

9. Three months ago ‘‘A,’’ a manufacturing 

company, acquired several new machines 

that will replace equipment on one of its 

production lines. ‘‘A’s’’ capacity to produce 

the same products increased modestly when 

the integration of the new equipment was 

completed. ‘‘B,’’ a manufacturing company 

that produces products similar to those 

produced by ‘‘A,’’ has entered into a contract 

to acquire for in excess of $50 million (as 

adjusted) the machinery that ‘‘A’’ replaced. 

Delivery of the equipment by ‘‘A’’ to ‘‘B’’ is 

scheduled to occur within thirty days. Since 

‘‘A’’ purchased new machinery to replace the 

productive capacity of the used equipment, 

which it sold within six months of the 

purchase of the new equipment, the 

acquisition by ‘‘B’’ is exempt under 

§ 802.1(d)(3). 

10. ‘‘A’’ will sell to ‘‘B’’ for in excess of $50 

million (as adjusted) all of the equipment 

‘‘A’’ uses exclusively to perform its billing 

requirements. ‘‘B’’ will use the equipment to 

provide ‘‘A’s’’ billing needs pursuant to a 

contract which ‘‘A’’ and ‘‘B’’ executed 30 

days ago in conjunction with the equipment 

purchase agreement. Although the assets ‘‘B’’

will acquire make up essentially all of the 

assets of one of ‘‘A’s’’ management and 

administrative support services divisions, the 

acquisition qualifies for the exemption under 

§ 802.1(d)(4) because a company’s internal 

management and administrative support 

services, however organized, are not an 

operating unit as defined by § 802.1(a). 

Management and administrative support 

services are not a ‘‘business undertaking’’ as 

that term is used in § 802.1(a). Rather, they 

provide support and benefit to the company’s 

operating units and support the company’s 

business operations. However, if the assets 

being sold also derived revenues from 

providing billing services for third parties, 

then the transfer of these assets would not be 

exempt under § 802.1(d)(4), since the 

equipment is not being used solely to provide 

management and administrative support 

services to ‘‘A’’.

* * * * *

■ 17. Amend § 802.2 by revising 

examples 2 through 7, 9, 10, and 12 to 

read as follows:

§ 802.2 Certain acquisitions of real 

property assets.

* * * * *

Examples:

* * * * *

2. ‘‘B,’’ a subsidiary of ‘‘A,’’ a financial 

institution, acquired a newly constructed 

power plant, which it leased to ‘‘X’’ pursuant 

to a lease financing arrangement. ‘‘A’s’’

acquisition of the plant through B was 

exempt under § 802.63(a) as a bona fide 

credit transaction entered into in the 

ordinary course of ‘‘A’s’’ business. ‘‘X’’

operated the plant as sole lessee for the next 

eight years and now proposes to exercise an 

option to buy the plant for in excess of $50 

million (as adjusted). ‘‘X’s’’ acquisition of the 

plant is exempt pursuant to § 802.2(b). The 

plant is being acquired from B, the lessor, 

which held title to the plant for financing 

purposes, and the purchaser, ‘‘X,’’ has had 

sole and continuous possession and use of 

the plant since its construction. 

3. ‘‘A’’ proposes to acquire a tract of 

wilderness land from ‘‘B’’ for consideration 

in excess of $50 million (as adjusted). Copper 

deposits valued in excess of $50 million (as 

adjusted) and timber reserves valued in 

excess of $50 million (as adjusted) are 

situated on the land and will be conveyed as 

part of this transaction. During the last three 

fiscal years preceding the sale, the property 

generated $50,000 from the sale of a small 

amount of timber cut from the reserves two 

years ago. ‘‘A’s’’ acquisition of the wilderness 

land from ‘‘B’’ is exempt as an acquisition of 

unproductive real property because the 

property did not generate revenues exceeding 

$5 million during the thirty-six months 

preceding the acquisition. The copper 

deposits and timber reserves are by definition 

unproductive real property and, thus, are not 

separately subject to the notification 

requirements. 

4. ‘‘A’’ proposes to purchase from ‘‘B’’ for 

in excess of $200 million (as adjusted) an old 

steel mill that is not currently operating to 

add to ‘‘A’s’’ existing steel production 

capacity. The mill has not generated 

revenues during the 36 months preceding the 

acquisition but contains equipment valued in 

excess of $50 million (as adjusted) that ‘‘A’’

plans to refurbish for use in its operations. 

‘‘A’s’’ acquisition of the mill and the land on 

which it is located is exempt as unproductive 

4994 Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 

real property. However, the transfer of the 

equipment and any assets other than the 

unproductive property is not exempt and is 

separately subject to the notification 

requirements of the act. 

5. ‘‘A’’ proposes to purchase two 

downtown lots, Parcels 1 and 2, from ‘‘B’’ for 

in excess of $50 million (as adjusted). Parcel 

1, located in the southwest section, contains 

no structures or improvements. A hotel is 

located in the northeast section on Parcel 2, 

and it has generated $9 million in revenues 

during the past three years. The purchase of 

Parcel 1 is exempt if it qualifies as 

unproductive real property, i.e., it has not 

generated annual revenues in excess of $5 

million in the three fiscal years prior to the 

acquisition. Parcel 2 is not unproductive real 

property, but its acquisition is exempt under 

§ 802.2(e) as the acquisition of a hotel.

6. ‘‘A’’ plans to purchase from ‘‘B,’’ a 

manufacturer, a newly-constructed building 

that ‘‘B’’ had intended to equip for use in its 

manufacturing operations. ‘‘B’’ was unable to 

secure financing to purchase the necessary 

equipment and ‘‘A’’, also a manufacturer, 

will be required to invest in excess of $50 

million (as adjusted) in order to equip the 

building for use in its production operations. 

This building is not a new facility under 

§ 802.2 (a), because it was not constructed or 

held by ‘‘B’’ for sale or resale. However, the 

acquisition of the building qualifies for 

exemption as unproductive real property 

pursuant to § 802.2(c)(1). The building is not 

yet a manufacturing facility since it does not 

contain equipment and requires significant 

capital investment before it can be used as a 

manufacturing facility. 

7. ‘‘A’’ proposes to purchase from ‘‘B,’’ for 

in excess of $50 million (as adjusted), a 100 

acre parcel of land that includes a currently 

operating factory occupying 10 acres. The 

other 90 adjoining acres are vacant and 

unimproved and are used by ‘‘B’’ for storage 

of supplies and equipment. The factory and 

the unimproved acreage have an aggregate 

fair market value of in excess of $50 million 

(as adjusted). The transaction is not exempt 

under § 802.2(c) because the vacant property 

is adjacent to property occupied by the 

operating factory. Moreover, if the 90 acres 

were not adjacent to the 10 acres occupied 

by the factory, the transaction would not be 

exempt because the 90 acres are being used 

in conjunction with the factory being 

acquired and thus are not unproductive 

property.

* * * * *

9. ‘‘A’’ intends to acquire three shopping 

centers from ‘‘B’’ for a total of in excess of 

$200 million (as adjusted). The anchor stores 

in two of the shopping centers are 

department stores, the businesses of which 

‘‘A’’ is buying from ‘‘B’’ as part of the overall 

transaction. The acquisition of the shopping 

centers is an acquisition of retail rental space 

that is exempt under § 802.2(h). However, 

‘‘A’s’’ acquisition of the department store 

businesses, including the portion of the 

shopping centers that the two department 

stores being purchased occupy, are separately 

subject to the notification requirements. If the 

value of these assets exceeds $50 million (as 

adjusted), ‘‘A’’ must comply with the 

requirements of the act for this part of the 

transaction. 

10. ‘‘A’’ wishes to purchase from ‘‘B’’ a 

parcel of land for in excess of $50 million (as 

adjusted). The parcel contains a race track 

and a golf course. The golf course qualifies 

as recreational land pursuant to § 802.2(f), 

but the race track is not included in the 

exemption. Therefore, if the value of the race 

track is more than $50 million (as adjusted), 

‘‘A’’ will have to file notification for the 

purchase of the race track.

* * * * *

12. ‘‘A’’ proposes to purchase the 

prescription drug wholesale distribution 

business of ‘‘B’’ for in excess of $50 million 

(as adjusted). The business includes six 

regional warehouses used for ‘‘B’s’’ national 

wholesale drug distribution business. Since 

‘‘A’’ is acquiring the warehouses in 

connection with the acquisition of ‘‘B’s’’

prescription drug wholesale distribution 

business, the acquisition of the warehouses is 

not exempt.

■ 18. Amend § 802.3 by revising 

Examples 2 and 3 to read as follows:

§ 802.3 Acquisitions of carbon-based 

mineral reserves.

* * * * *

Examples:

* * * * *

2. ‘‘A,’’ an oil company, proposes to 

acquire for $180 million oil reserves 

currently in production along with field 

pipelines and treating and metering facilities 

which serve such reserves exclusively. The 

acquisition of the reserves and the associated 

assets are exempt. ‘‘A’’ will also acquire from 

‘‘B’’ for in excess of $50 million (as adjusted) 

a natural gas processing plant and its 

associated gathering pipeline system. This 

acquisition is not exempt since § 802.3(c) 

excludes these assets from the exemption in 

§ 802.3 for transfers of associated exploration 

or production assets. 

3. ‘‘A,’’ an oil company, proposes to 

acquire a coal mine currently in operation 

and associated production assets for $90 

million from ‘‘B,’’ an oil company. ‘‘A’’ will 

also purchase from ‘‘B’’ producing oil 

reserves valued at $100 million and an oil 

refinery valued at $13 million. The 

acquisition of the coal mine and the oil 

reserves is exempt pursuant to § 802.3. 

Although § 802.3(c) excludes the refinery 

from the exemption in § 802.3 for transfers of 

associated exploration and production assets, 

‘‘A’s’’ acquisition of the refinery is not 

subject to the notification requirements of the 

act because its value does not exceed $50 

million (as adjusted).

* * * * *

■ 19. Amend § 802.4 by revising 

paragraph (a) and Examples 1 and 2 to 

read as follows:

§ 802.4 Acquisitions of voting securities of 

issuers holding certain assets the direct 

acquisition of which is exempt. 

(a) An acquisition of voting securities 

of an issuer whose assets together with 

those of all entities it controls consist or 

will consist of assets whose purchase 

would be exempt from the requirements 

of the act pursuant to Section 7A(c)(2) 

of the act, § 802.2, § 802.3 or § 802.5 of 

this part is exempt from the reporting 

requirements if the acquired issuer and 

all entities it controls do not hold other 

non-exempt assets with an aggregate fair 

market value of more than $50 million 

(as adjusted).

* * * * *

(c) * * *

Examples:

1. ‘‘A,’’ a real estate investment company, 

proposes to purchase 100 percent of the 

voting securities of C, a wholly-owned 

subsidiary of ‘‘B,’’ a construction company. 

C’s assets are a newly constructed, never 

occupied hotel, including fixtures, 

furnishings and insurance policies. The 

acquisition of the hotel would be exempt 

under § 802.2(a) as a new facility and under 

§ 802.2(d). Therefore, the acquisition of the 

voting securities of C is exempt pursuant to 

§ 802.4(a) since C holds assets whose direct 

purchase would be exempt under § 802.2 and 

does not hold non-exempt assets exceeding 

$50 million (as adjusted) in value. 

2. ‘‘A’’ proposes to acquire 60 percent of 

the voting securities of C from ‘‘B.’’ C’s assets 

consist of a portfolio of mortgages valued at 

$55 million and a small manufacturing plant 

valued at $26 million. The manufacturing 

plant is an operating unit for purposes of 

§ 802.1(a). Since the acquisition of the 

mortgages would be exempt pursuant to 

Section 7A(c)(2) of the act and since the 

value of the non-exempt manufacturing plant 

is less than $50 million (as adjusted), this 

acquisition is exempt under § 802.4(a).

* * * * *

■ 20. Amend § 802.5 by revising 

Example 2 to read as follows:

§ 802.5 Acquisitions of investment rental 

property assets.

* * * * *

Examples:

* * * * *

2. ‘‘X’’ intends to buy from ‘‘Y’’ a 

development commonly referred to as an 

industrial park. The industrial park contains 

a warehouse/distribution center, a retail tire 

and automobile parts store, an office 

building, and a small factory. The industrial 

park also contains several parcels of vacant 

land. If ‘‘X’’ intends to acquire this industrial 

park as investment rental property, the 

acquisition will be exempt pursuant to 

§ 802.5. If, however, ‘‘X’’ intends to use the 

factory for its own manufacturing operations, 

this exemption would be unavailable. The 

exemptions in § 802.2 for warehouses, rental 

retail space, office buildings, and 

undeveloped land may still apply and, if the 

value of the factory is $50 million (as 

adjusted) or less, the entire transaction may 

be exempted by that section.

■ 21. Amend § 802.9 by revising 

Example 1 to read as follows:

§ 802.9 Acquisition solely for the purpose 

of investment.

* * * * *

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Examples:

1. Suppose that acquiring person ‘‘A’’

acquires 6 percent of the voting securities of 

issuer X, valued in excess of $50 million (as 

adjusted). If the acquisition is solely for the 

purpose of investment, it is exempt under 

Section 7A(c)(9).

* * * * *

■ 22. Amend § 802.21 by revising the 

heading, paragraph (a)(3), and Examples 

1 through 4 following paragraph (a); by 

adding new Examples 5 and 6 to 

paragraph (a) to read as follows; and by 

removing paragraph (c).

§ 802.21 Acquisitions of voting securities 

not meeting or exceeding greater 

notification threshold (as adjusted). 

(a) * * * 

(3) The acquisition will not increase 

the holdings of the acquiring person to 

meet or exceed a notification threshold 

(as adjusted) greater than the greatest 

notification threshold met or exceeded 

in the earlier acquisition.

Examples:

1. In 2004, Corporation A acquired $53 

million of the voting securities of corporation 

B and both ‘‘A’’ and ‘‘B’’ filed notification as 

required, indicating the $50 million 

threshold. Within five years of the expiration 

of the original waiting period, ‘‘A’’ acquires 

additional voting securities of B but not in an 

amount sufficient to meet or exceed $100 

million (as adjusted) or 50 percent of the 

voting securities of B. No additional 

notification is required. 

2. In 2004, Corporation A acquired $53 

million of the voting securities of corporation 

B and both ‘‘A’’ and ‘‘B’’ filed notification as 

required, indicating the $50 million 

threshold. Suppose that in year three 

following the expiration of the waiting 

period, the $50 million notification threshold 

has been adjusted to $56 million pursuant to 

Section 7A(a)(2)(a) of the Act. ‘‘A’’ now 

intends to acquire an additional $5 million 

of the voting securities of B. ‘‘A’’ is not 

required to file another notification even 

though it now holds voting securities in 

excess of the $56 million notification 

threshold (which is greater than the $50 

million notification threshold indicated in its 

filing), because it has not met or exceeded a 

notification threshold (as adjusted) greater 

than the notification threshold exceeded in 

the earlier acquisition (i.e. $100 million (as 

adjusted) or 50% notification thresholds). 

3. Same facts as in Example 2 above except 

now the five year period has expired. 

Suppose that, the $50 million notification 

threshold has been adjusted to $57 million 

pursuant to Section 7A(a)(2)(a) of the Act. 

‘‘A’’ now holds $58 million of voting 

securities of B. Because § 802.21(a)(2) is no 

longer satisfied, the acquisition of any 

additional voting securities of B will require 

a new filing because ‘‘A’’ will hold voting 

securities valued in excess of the $57 million 

notification threshold. If, however, the $50 

million notification threshold had been 

adjusted to $60 million at the end of the fiveyear period, A could acquire up to that 

threshold without a new filing. 

4. This section also allows a person to 

recross any of the threshold notification 

levels that were in effect at the time of filing 

notification any number of times within five 

years of the expiration of the waiting period 

following notification. Thus, if in Example 1, 

‘‘A’’ had disposed of some voting securities 

so that it held less than $50 million of the 

voting securities of B, and thereafter had 

increased its holdings to more than $50 

million but less than $100 million or 50 

percent of B, notification would not be 

required if the increase occurred within 5 

years of the expiration of the original waiting 

period.

5. A files notification at the $50 million 

notification threshold and acquires $51 

million of the voting securities of B in the 

year following expiration of the waiting 

period. The next greater notification 

threshold at the time of filing was $100 

million. In year three, the $100 million 

notification threshold has been adjusted to 

$106 million. A can now acquire up to, but 

not meet or exceed, voting securities of B 

valued at $106 million. As the original $100 

million threshold is adjusted upward in years 

four and five, A can acquire up to those new 

thresholds as the adjustments are effected. 

6. A files notification at the $50 million 

threshold in January of year one. In February 

of year one, the $50 million threshold is 

adjusted to $52 million. A only needs to 

acquire in excess of $50 million of voting 

securities of B, not in excess of $52 million, 

to have exceeded the threshold which was 

filed for in the year following expiration of 

the waiting period (see § 803.7). It may then 

acquire up to the next greater notification 

threshold (as adjusted) during the five years 

following expiration of the waiting period.

■ 23. Amend § 802.35 by revising 

Examples 1 and 2 to read as follows:

§ 802.35 Acquisitions by employee trusts.

* * * * *

Examples:

1. Company A establishes a trust for its 

employees that meets the qualifications of 

section 401 of the Internal Revenue Code. 

Company A has the power to designate the 

trustee of the trust. That trust then acquires 

30% of the voting securities of Company A 

for in excess of $50 million (as adjusted). 

Later, the trust acquires 20% of the stock of 

Company B, a wholly-owned subsidiary of 

Company A, for in excess of $50 million (as 

adjusted). Neither acquisition is reportable. 

2. Assume that in the example above, ‘‘A’’

has total assets of $100 million (as adjusted). 

‘‘C’’ also has total assets of $100 million (as 

adjusted) and is not controlled by Company 

A. The trust controlled by Company A plans 

to acquire 40 percent of the voting securities 

of Company C for in excess of $50 million 

(as adjusted). Since Company C is not 

included within ‘‘A,’’ ‘‘A’’ must observe the 

requirements of the act before the trust makes 

the acquisition of Company C’s shares.

■ 24. Amend § 802.41 by revising 

Examples 1 and 2 to read as follows:

§ 802.41 Joint venture or other 

corporations at time of formation.

* * * * *

Examples:

1. Corporations A and B, each having sales 

of in excess of $100 million (as adjusted), 

each propose to contribute in excess of $50 

million (as adjusted) in cash in exchange for 

50 percent of the voting securities of a new 

corporation, N. Under this section, the new 

corporation need not file notification, 

although both ‘‘A’’ and ‘‘B’’ must do so and 

observe the waiting period prior to receiving 

any voting securities of N. 

2. In addition to the facts in Example 1 of 

this section, A and B have agreed that upon 

creation N will purchase 100 percent of the 

voting securities of corporation C for in 

excess of $50 million (as adjusted). Because 

N’s purchase of C is not a transaction in 

connection with N’s formation, and because 

in any event C is not a contributor to the 

formation of N, ‘‘A,’’ ‘‘B’’ and ‘‘C’’ must file 

with respect to the proposed acquisition of C 

and must observe the waiting period.

■ 25. Amend § 802.50 by revising 

paragraphs (a), (b)(2) and (b)(3) and 

Examples 2 through 4 to read as follows:

§ 802.50 Acquisitions of foreign assets. 

(a) The acquisition of assets located 

outside the United States shall be 

exempt from the requirements of the act 

unless the foreign assets the acquiring 

person would hold as a result of the 

acquisition generated sales in or into the 

U.S. exceeding $50 million (as adjusted) 

during the acquired person’s most 

recent fiscal year. 

(b) * * *

(2) The aggregate sales of the 

acquiring and acquired persons in or 

into the United States are less than $110 

million (as adjusted) in their respective 

most recent fiscal years; 

(3) The aggregate total assets of the 

acquiring and acquired persons located 

in the United States (other than 

investment assets, voting or nonvoting 

securities of another person, and assets 

included pursuant to § 801.40(d)(2) of 

this chapter) are less than $110 million 

(as adjusted) ; and

* * * * *

Examples:

* * * * *

2. Sixty days after the transaction in 

example 1, ‘‘A’’ proposes to sell to ‘‘B’’ a 

second manufacturing plant located abroad; 

sales in or into the United States attributable 

to this plant, when combined with the sales 

into the United States of the first plant, 

totaled in excess of $50 million (as adjusted) 

in the most recent fiscal year. Since ‘‘B’’

would be acquiring the second plant within 

180 days of the first plant, both plants would 

be considered assets of ‘‘A’’ held by ‘‘B’’ as 

a result of the second acquisition (see

§ 801.13(b)(2) of this chapter). Since the total 

sales in or into the United States exceed $50 

million (as adjusted), the acquisition of the 

second plant would not be exempt under this 

paragraph (a) of this section. 

3. Assume that ‘‘A’’ and ‘‘B’’ are foreign 

persons with aggregate sales in or into the 

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United States of in excess of $110 million (as 

adjusted). If ‘‘A’’ acquires only foreign assets 

of ‘‘B,’’ and if those assets generated $50 

million (as adjusted) or less in sales in or into 

the United States, the transaction is exempt. 

4. Assume that ‘‘A’’ and ‘‘B’’ are foreign 

persons with aggregate sales in or into the 

United States and assets located in the 

United Sates of less than $110 million (as 

adjusted). If ‘‘A’’ acquires only foreign assets 

of ‘‘B,’’ and those assets generated in excess 

of $50 million (as adjusted) in sales in or into 

the United States during the most recent 

fiscal year, the transaction is exempt from 

reporting if the assets are valued at $200 

million (as adjusted) or less, but is reportable 

if valued at greater than $200 million (as 

adjusted).

■ 26. Amend § 802.51 by revising 

paragraphs (a), (b), (c)(2) and (c)(3) and 

Examples 1 through 3 to read as follows:

§ 802.51 Acquisitions of voting securities 

of a foreign issuer. 

(a) By U.S. persons. (1) The 

acquisition of voting securities of a 

foreign issuer by a U.S. person shall be 

exempt from the requirements of the act 

unless the issuer (including all entities 

controlled by the issuer) either: holds 

assets located in the United States (other 

than investment assets, voting or 

nonvoting securities of another person, 

and assets included pursuant to 

§ 801.40(d)(2) of this chapter) having an 

aggregate total value of over $50 million 

(as adjusted); or made aggregate sales in 

or into the United States of over $50 

million (as adjusted) in its most recent 

fiscal year. 

(2) If interests in multiple foreign 

issuers are being acquired from the same 

acquired person, the assets located in 

the United States and sales in or into the 

United States of all the issuers must be 

aggregated to determine whether either 

$50 million (as adjusted) limitation is 

exceeded. 

(b) By foreign persons. (1) The 

acquisition of voting securities of a 

foreign issuer by a foreign person shall 

be exempt from the requirements of the 

act unless the acquisition will confer 

control of the issuer and the issuer 

(including all entities controlled by the 

issuer) either: holds assets located in the 

United States (other than investment 

assets, voting or nonvoting securities of 

another person, and assets included 

pursuant to § 801.40(d)(2) of this 

chapter) having an aggregate total value 

of over $50 million (as adjusted); or 

made aggregate sales in or into the 

United States of over $50 million (as 

adjusted) in its most recent fiscal year. 

(2) If controlling interests in multiple 

foreign issuers are being acquired from 

the same acquired person, the assets 

located in the United States and sales in 

or into the United States of all the 

issuers must be aggregated to determine 

whether either $50 million (as adjusted) 

limitation is exceeded. 

(c) * * * 

(2) The aggregate sales of the 

acquiring and acquired persons in or 

into the United States are less than $110 

million (as adjusted) in their respective 

most recent fiscal years;

(3) The aggregate total assets of the 

acquiring and acquired persons located 

in the United States (other than 

investment assets, voting or nonvoting 

securities of another person, and assets 

included pursuant to § 801.40(d)(2) of 

this chapter) are less than $110 million 

(as adjusted); and

* * * * *

Examples:

1. ‘‘A,’’ a U.S. person, is to acquire the 

voting securities of C, a foreign issuer. C has 

no assets in the United States, but made 

aggregate sales into the United States of in 

excess of 50 million (as adjusted) in the most 

recent fiscal year. The transaction is not 

exempt under this section. 

2. Assume that ‘‘A’’ and ‘‘B’’ are foreign 

persons with aggregate sales in or into the 

United States in excess of $110 million (as 

adjusted), and that ‘‘A’’ is acquiring 100% of 

the voting securities of ‘‘B.’’ Included within 

‘‘B’’ is U.S. issuer C, whose total U.S. assets 

are valued in excess of $50 million (as 

adjusted). Since ‘‘A’’ will be acquiring 

control of an issuer, C, with total U.S. assets 

of more than $50 million (as adjusted), and 

the parties’ aggregate sales in or into the U.S. 

in the relevant time period exceed $110 

million (as adjusted), the acquisition is not 

exempt under this section. 

3. ‘‘A,’’ a foreign person, intends to acquire 

100 percent of the voting securities of two 

wholly owned subsidiaries of ‘‘B’’ for a total 

of in excess of $50 million (as adjusted). 

BSUB1 is a foreign issuer with less than $50 

million (as adjusted) in sales into the U.S. in 

its most recent fiscal year and with assets of 

less than $50 million (as adjusted) located in 

the U.S. Less than $50 million (as adjusted) 

of the acquisition price has been allocated to 

BSUB1. BSUB2 is a U.S. issuer with more 

than $50 million (as adjusted) in U.S. sales 

and more than $50 million (as adjusted) in 

assets located in the U.S. Less than $50 

million (as adjusted) of the acquisition price 

is allocated to BSUB2. Since BSUB1 does not 

exceed the $50 million (as adjusted) 

limitation for U.S. sales or assets in 

§ 802.51(b), its voting securities are not held 

as a result of the acquisition (see § 801.15(b) 

of this chapter). Since the acquisition price 

for BSUB2 alone would not result in ‘‘A’’

holding in excess of $50 million (as adjusted) 

of voting securities of the acquired person, 

the transaction is non-reportable in its 

entirety. Note that the U.S. sales and assets 

of BSUB1 are not aggregated with those of 

BSUB2 for purposes of determining whether 

the limitations in paragraph (b) of this 

section are exceeded. If BSUB2 were also a 

foreign issuer, such aggregation would be 

required under paragraph (b)(2) of this 

section, and the transaction in its entirety 

would be reportable.

■ 27. Amend § 802.52 by revising its 

Example to read as follows:

§ 802.52 Acquisitions by or from foreign 

governmental corporations.

* * * * *

Example: The government of foreign 

country X has decided to sell assets of its 

wholly owned corporation, B, all of which 

are located in foreign country X. The buyer 

is ‘‘A,’’ a U.S. person. Regardless of the 

aggregate sales in or into the United States 

attributable to the assets of B, the transaction 

is exempt under this section. (If such 

aggregate sales were $50 million (as adjusted) 

or less, the transaction would also be exempt 

under § 802.50).

■ 28. Amend § 802.64 by revising 

Example 1 to read as follows:

§ 802.64 Acquisitions of voting securities 

by certain institutional investors.

* * * * *

(c) * * *

Examples:

1. Assume that A and its subsidiary, B, are 

both institutional investors as defined in 

paragraph (a) of this section, that X is not, 

and that the conditions set forth in 

paragraphs (b)(2), (3) and (4) of this section 

are satisfied. Either A or B may acquire 

voting securities of X worth in excess of $50 

million (as adjusted) as long as the aggregate 

amount held by person ‘‘A’’ as a result of the 

acquisition does not exceed 15 percent of X’s 

outstanding voting securities. If the aggregate 

holdings would exceed 15 percent, ‘‘A’’ may 

acquire no more than $50 million (as 

adjusted) worth of voting securities without 

being subject to the requirements of the act.

* * * * *

PART 803—TRANSMITTAL RULES

■ 29. The authority citation for part 803 

continues to read as follows:

Authority: 15 U.S.C. 18a(d).

■ 30. Amend § 803.5(a)(2) by revising 

Examples 2 and 3 to read as follows:

§ 803.5 Affidavits required. 

(a) * * * 

(2) * * *

Examples:

* * * * *

2. ‘‘A’’ holds 100,000 shares of the voting 

securities of Company B. ‘‘A’’ has a good 

faith intention to acquire an additional 

900,000 shares of Company B’s voting 

securities. ‘‘A’’ states in its notice to B, inter 

alia, that as a result of the acquisition it will 

hold 1,000,000 shares. If 1,000,000 shares of 

Company B represent 20 percent of Company 

B’s outstanding voting securities, the 

statement will be deemed by the enforcement 

agencies a notification for the $100 million 

threshold (as adjusted). 

3. Company A intends to acquire voting 

securities of Company B. ‘‘A’’ does not know 

exactly how many shares it will acquire, but 

it knows it will definitely acquire in excess 

of $50 million (as adjusted) worth and may 

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acquire 50 percent of Company B’s shares. 

‘‘A’’’s notice to the acquired person would 

meet the requirements of Sec. 803.5(a)(1)(iii) 

if it states, inter alia, either: ‘‘Company A has 

a present good faith intention to acquire in 

excess of $50 million (as adjusted) of the 

outstanding voting securities of Company B, 

and depending on market conditions, may 

acquire more of the voting securities of 

Company B and thus designates the 50 

percent threshold,’’ or ‘‘Company A has a 

present good faith intention to acquire in 

excess of $50 million (as adjusted) of the 

outstanding voting securities of Company B, 

and depending on market conditions may 

acquire 50 percent or more of the voting 

securities of Company B.’’ The Commission 

would deem either of these statements as 

intending to give notice for the 50 percent 

threshold.

* * * * *

■ 31. Amend § 803.7 by revising its 

example to read as follows:

§ 803.7 Expiration of notification.

* * * * *

Example: ‘‘A’’ files notification that in 

excess of $100 million (as adjusted) of the 

voting securities of corporation B are to be 

acquired. One year after the expiration of the 

waiting period, ‘‘A’’ has acquired less than 

$100 million (as adjusted) of B’s voting 

securities. Although § 802.21 will permit ‘‘A’’

to purchase any amount of B’s voting 

securities short of $100 million (as adjusted) 

within 5 years from the expiration of the 

waiting period, A’s holdings may not meet or 

exceed the $100 million (as adjusted) 

notification threshold without ‘‘A’’ and ‘‘B’’

again filing notification and observing a 

waiting period.

■ 32. Amend § 803.9(a) by revising 

Examples 1 through 6 to read as follows:

§ 803.9 Filing fee. 

(a) * * *

Examples:

1. ‘‘A’’ wishes to acquire voting securities 

issued by B, where the greater of the 

acquisition price and the market price is in 

excess of $50 million (as adjusted) but less 

than $100 million (as adjusted) pursuant to 

§ 801.10. When ‘‘A’’ files notification for the 

transaction, it must indicate the $50 million 

(as adjusted) threshold and pay a filing fee 

of $45,000 because the aggregate total amount 

of the acquisition is less than $100 million 

(as adjusted), but greater than $50 million (as 

adjusted). 

2. ‘‘A’’ acquires less than $50 million (as 

adjusted) of assets from ‘‘B.’’ The parties 

meet the size of person criteria of Section 

7A(a)(2)(B), but the transaction is not 

reportable because it does not exceed the $50 

million (as adjusted) size of transaction 

threshold of that provision. Two months later 

‘‘A’’ acquires additional assets from ‘‘B’’

valued at between $50 million (as adjusted) 

and $100 million (as adjusted). Pursuant to 

the aggregation requirements of 

§ 801.13(b)(2)(ii), the aggregate total amount 

of ‘‘B’s’’ assets that ‘‘A’’ will hold as a result 

of the second acquisition is in excess of $100 

million (as adjusted). Accordingly, when ‘‘A’’

files notification for the second transaction, 

‘‘A’’ must indicate the $100 million (as 

adjusted) threshold and pay a filing fee of 

$125,000 because the aggregate total amount 

of the acquisition is less than $500 million 

(as adjusted), but not less than $100 million 

(as adjusted). 

3. ‘‘A’’ acquires in excess of $50 million (as 

adjusted) of voting securities issued by B 

after submitting its notification and $45,000 

filing fee and indicates the $50 million (as 

adjusted) threshold. Two years later, ‘‘A’’

files to acquire additional voting securities 

issued by B valued at $50 million (as 

adjusted) because it will exceed the next 

higher reporting threshold (see §§ 801.1(h)). 

Assuming the second transaction is 

reportable and the value of its initial 

holdings is unchanged (see §§ 801.13(a)(2) 

and 801.10(c)), the provisions of 

§ 801.13(a)(1) require that ‘‘A’’ report that the 

value of the second transaction is in excess 

of $100 million (as adjusted) because ‘‘A’’

must aggregate previously acquired securities 

in calculating the value of B’s voting 

securities that it will hold as a result of the 

second acquisition. ‘‘A’’ should pay a filing 

fee of $125,000. 

4. ‘‘A’’ signs a contract with a stated 

purchase price in excess of $100 million (as 

adjusted), subject to adjustments, to acquire 

all of the assets of ‘‘B.’’ If the amount of 

adjustments can be reasonably estimated, the 

acquisition price—as adjusted to reflect that 

estimate—is determined. If the amount of 

adjustments cannot be reasonably estimated, 

the acquisition price is undetermined. In 

either case the board or its delegee must also 

determine in good faith the fair market value. 

(§ 801.10(b) states that the value of an asset 

acquisition is to be the fair market value or 

the acquisition price, if determined and 

greater than fair market value.) ‘‘A’’ files 

notification and submits a $45,000 filing fee. 

‘‘A’’’s decision to pay that fee may be 

justified on either of two bases, and ‘‘A’’

should submit an attachment to the 

Notification and Report Form explaining the 

valuation. First, ‘‘A’’ may have concluded 

that the acquisition price can be reasonably 

estimated to be less than $100 million (as 

adjusted), because of anticipated 

adjustments—e.g., based on due diligence by 

‘‘A’s’’ accounting firm indicating that one 

third of the inventory is not saleable. If fair 

market value is also determined in good faith 

to be less than $100 million (as adjusted), the 

$45,000 fee is appropriate. Alternatively, ‘‘A’’

may conclude that because the adjustments 

cannot reasonably be estimated, acquisition 

price is undetermined. If so, ‘‘A’’ would base 

the valuation on the good faith determination 

of fair market value. The acquiring party’s 

execution of the Certification also attests to 

the good faith valuation of the value of the 

transaction. 

5. ‘‘A’’ contracts to acquire all of the assets 

of ‘‘B’’ for in excess of $500 million (as 

adjusted). The assets include hotels, office 

buildings, and rental retail property, all of 

which are exempted by § 802.2. Section 802.2 

directs that these assets are exempt from the 

requirements of the act and that reporting 

requirements for the transaction should be 

determined by analyzing the remainder of the 

acquisition as if it were a separate 

transaction. Furthermore, § 801.15(a)(2) states 

that those exempt assets are never held as a 

result of the acquisition. Accordingly, the 

aggregate amount of the transaction is in 

excess of $100 million (as adjusted), but less 

than $500 million (as adjusted). ‘‘A’’ will be 

liable for a filing fee of $125,000, rather than 

$280,000, because the value of the 

transaction is not less than $100 million (as 

adjusted) but less than $500 million (as 

adjusted). Note, however, that ‘‘A’’ must 

include an attachment in its Notification and 

Report Form setting out both the in excess of 

$500 million (as adjusted) total purchase 

price and the basis for its determination that 

the aggregate total amount of the acquisition 

under the rules is between $100 million (as 

adjusted) and $500 million (as adjusted) 

rather than in excess of $500 million (as 

adjusted), in accordance with the 

Instructions to the Form. 

6. ‘‘A’’ acquires coal reserves from ‘‘B’’

valued at $150 million. No notification or 

filing fee is required because the acquisition 

is exempted by § 802.3(b). Three months 

later, A proposes to acquire additional coal 

reserves from ‘‘B’’ valued at $500 million (as 

adjusted). This transaction is subject to the 

notification requirements of the act because 

the value of the acquisition exceeds the $200 

million limitation on the exemption in 

§ 802.3(b). As a result of § 801.13(b)(2)(ii), the 

prior $150 million acquisition must be added 

because the additional $500 million (as 

adjusted) of coal reserves were acquired from 

the same person within 180 days of the 

initial acquisition. Because aggregating the 

two acquisitions exceeds the $200 million 

exemption limitation, § 801.15(b) directs that 

‘‘A’’ will also hold the previously exempt 

$150 million acquisition; thus, the aggregate 

amount held as a result of the $500 million 

(as adjusted) acquisition exceeds $500 

million (as adjusted). Accordingly, ‘‘A’’ must 

file notification to acquire the coal reserves 

valued in excess of $500 million (as adjusted) 

and pay a filing fee of $280,000.

* * * * *

■ 33. Revise the Appendix to part 803 to 

read as follows: 

BILLING CODE 6750–01–P

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ER31JA05.026</GPH>
5018 Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 


ER31JA05.027</GPH>
Federal Register / Vol. 70, No. 19 / Monday, January 31, 2005 / Rules and Regulations 5019

By direction of the Commission. 

Donald S. Clark, 

Secretary.

[FR Doc. 05–1679 Filed 1–28–05; 8:45 am] 

BILLING CODE 6750–01–C