Question
[redacted]
November 6, 2000
Via Facsimile
Mr. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission 6
th & Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mike:
Thank you for your time and advice Friday. I write to review the facts we discussed, provide additional information regarding the appointment of the boards of the current organizations, and confirm your advice.
Two businesses, A and B, recognized as non-profit organizations under 501(c)(3) of the Internal Revenue Code, intend to form Newco, also a non-profit organization. A and B will be the sole members of Newco.
Newco will have no appreciable assets, A and B will each appoint 50% of the members of Newco's board. The President of A and the CEO of B will serve as ex officio members of Newco's board, and can be removed, in effect, from those ex officio seats by Newco's board under certain circumstances.
Newco will have substantial control over the business activities of A and B. I explained, for example, that Newco would exercise control over budgets and capital expenditures of A and B, and could in some in some circumstances influence who is named as CEO of A or the President of B.
As you requested, I supply here additional information regarding the appointment of the boards of A and B. A's board will perpetuate itself through self-elections, according to its own by-laws, and the embers of B will continue to elect the members of B's board. Newco will no name or appoint any member of the boards of either A or B.
Based on these facts, you conclude that the formation of Newco is not reportable event for Hart-Scott-Rodino ("HSR") purposes.
If I have misstated your conclusion regarding the HSR reportability of Newco, please contact me at your earliest convenience.
Thank you again for your time and assistance.
Sincerely,
[redacted]
cc: [redacted]