Question
(redacted)
Via Facsimile
May 1, 2000
Mr. Patrick Sharpe
Premerger Notification Office
Bureau of Competition
Room 301
Federal Trade Commission
Washington, D.C. 20580
RE: Hypothetical Transaction Structure
Dear Mr. Sharpe:
In accordance with our telephone conversation earlier this morning, please find attached a draft statement of the hypothetical transaction structure that I described to you on the telephone. Please give me a call as (redacted) once you have had a chance to review the attached so that we can discuss on an informal basis the applicability of the Hart-Scott-Rodino filing requirements to such a transaction.
Very truly yours,
(redacted)
(redacted)
cc:(redacted) (w/attachment)
Hypothetical Transaction Structure
I. Current Ownership Structure
- Four corporations that have some similar shareholders
- Assume that no corporation or any shareholder has either total assets or annual net sales of $100 million or more
[Graphic attached to .pdf file]
II. Asset Drop Down into Newly-Formed LLC
The business, assets and liabilities of Corp. A, Corp. B., Corp. C and Corp. D would be contributed to a newly-formed LLC in a proportionate percentage equal to the value of the business and assets contributed by each such corporation to the newly-formed LLC.
One or more of the members of the LLC may control the LLC depending upon the number of LLC membership interests received which in turn is dependent upon the valuation of the business and assets contributed by each number of the LLC.
[Graphic attached to .pdf file]
III. $20 Million Financing and Distribution
The LLC would secure a line of credit from an affiliate financial institution of an Institutional Investor would acquire 51% of the LLC membership interests by purchasing 51% of each existing members interest for an aggregate of $15 million in cash. This would result in the Institutional Investor owning 51% of the LLCs membership interests and Corp. A, Corp. B, Corp. C and Corp. D. collectively owning 49% of LLCs membership interests.
[Graphic attached to .pdf file]
VI. Statements for Confirmation
1.The formation and capitalization of the LLC would not be reportable under the HSR Act as long as the Size-of-the-Parties test is not met or the Size-of-the-Transaction test is not met.
2.The Institutional Investors purchase of an aggregate of 51% of the newly-formed LLCs membership interests from the members of the LLC (Corp. A, Corp. B, Corp. C and Corp. D) immediately after formation and capitalization the LLC would not be a reportable event under the HSR Act (for each purchase from a particular member) under Formal Interpretation 15, as amended effective July 1, 1999, because no one person or entity would hold 100% of the membership interests of the LLC. In addition, it would be a reportable event because the Institutional Investor is investing only cash and is not contributing an existing business to LLC.