[name deleted]

Dear [name deleted]:

This is in response to your letter of January 14, 2002, regarding shares of [bank holding company "A"], controlled by [bank holding company "B"].

In your January 14 letter, you represented that [B] currently controls shares representing 54.7 percent of the total voting power of [A], including approximately 96.6 percent of the shares of [A's Z shares]. You have stated that [B] proposes to sell a certain number of [Z] Shares back to [A] (the "Sellback"), and that the Sellback would result in [B] controlling shares representing approximately 48.9 percent of the total voting power of [A]. In connection with the Sellback, [B] would enter into an agreement with [A] under which [A] may, at any time before June 30, 2002, require [B] to repurchase all the Sellback shares (the "Put") at a specified price. You seek the Legal Division's concurrence with your view that [B] would not be required to file an application under section 3 of the Bank Holding Company Act ("BHC Act") in the event that [A] exercises the Put and [B] repurchases the Sellback shares.

We understand that the [Z] Shares constitute a separate class of voting securities for purposes of the BHC Act, and that [B] would control approximately 95.8 percent of the outstanding [Z] Shares after the Sellback. In addition, we understand that [B] holds certain options to acquire a majority of [A's] outstanding [M] shares, [N] shares, and Common shares, as well as outstanding [Z] Shares [B] does not currently own, and that [B] would own shares representing more than 90 percent of the total voting power of [A] if [B] exercised all of these options. These options are immediately exercisable by [B] in its discretion, and the Board's Regulation Y presumes that a company that owns securities that are, at the option of the company, immediately convertible into voting securities of another company, controls the underlying voting securities.¹ You also have committed that, prior to reacquiring the Sellback shares as a result of the Put, [B] will submit pro forma financial statements and capital calculations to the Board, and will defer consummation of such repurchase until Board staff advises that it does not object to consummation of the repurchase.

Regulation Y provides that Board approval is not required for a bank holding company's acquisition of additional shares of another bank holding company "if more than 50 percent of the outstanding voting securities of the . . . bank holding company is lawfully controlled by the acquiring bank holding company prior to the acquisition."² The Board approved [B's] application to acquire a majority of [A's] total voting shares on [ ],³ and the Put would expire on [ ].

Based on these considerations and on all the facts of this case, including the representations and commitments made by [B], staff believes that this transaction is consistent with the Board's order and would not recommend that the Board require [B] to file an application under section 3 of the BHC Act to reacquire the [A] shares pursuant to the Put. This opinion is limited to the specific facts as you have presented them to Board staff. Any change in circumstances may result in a different opinion, and accordingly, you should notify staff promptly if any facts presented by you change.

Sincerely,

(signed) Scott G. Alvarez

Scott G. Alvarez

cc: [ ]

Footnote 1. See 12 C.F.R. §§ 225.31(d)(1)(i) Return to text 2. 12 C.F.R. §§ 225.12(c) Return to text 3. [     ] Return to text