Question
November 29, 2001
MichaelVerne
Premerger Notification Office
Bureau of Competition, Room 303
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
Re: Hart-Scott-Rodino Filing in TransactionNo. (redacted) Involving (Redacted) as
Acquiring Person and (Redacted) as Acquired Person
DearMike:
Asyou may recall, we spoke yesterday concerning the above-referenced Hart-Scottfiling. I relayed to you the following facts regarding the transaction:
On November 13, 2001, (redacted) and (redacted) made Hart-Scott filingsrelating to (redacted)s exercise of an option to acquire 100% of theoutstanding (untraded) voting securities of (redacted) Holding Company,Inc. (redacted) an indirect, wholly-owned (redacted) subsidiary.[1] The acquisition price to bepaid by (redacted) upon exercise of the option is determined according to aformula set forth in the Option Agreement attached to the filing as AttachmentA. Under the formula, the acquisition price is $973 million, less certaindebt and working capital adjustments.
As indicated in Item 3 of (redacted)s Hart-Scott form, based on(redacted)s debt level at the time the was submitted, (redacted)acquisition price would have been approximately $473 million. However,because (redacted) could not estimate precisely the amount of debt in(redacted) at the time of exercise of the option (redacted) conservativelyindicated the value of the transaction as over $500 million for Hart-Scottfiling threshold purposes.
Subsequent to the parties submitting their Hart-Scott filings, (redacted) addeda significant amount of debt to (redacted). As a result of thisadditional debt, the acquisition price for (redacted)s exercise of itsoption under the formula referenced above will be no more than approximately$25 million.
On November 28 (redacted) provided (redacted) with notice of its intent toexercise the option, and (redacted) also terminated its agreement to merge with(redacted).[2]
Based on the above facts, youadvised that (redacted)s exercise of its option to acquire (redacted)would not be Hart-Scott reportable. You advised that the value of the untradedvoting securities to be acquired would be the option exercise price, excludingany consideration paid to acquire the option. You further advised thatbecause this acquisition price would be less than $50 million, the transactionwould be non-reportable, regardless of the fact that (redacted) previouslysubmitted a Hart-Scott filing pertaining to the transaction. Finally, youindicated that in order to consummate the acquisition, it would not benecessary for (redacted) to withdraw its Hart-Scott filing.
Please call if you have anyquestions or if you disagree with the conclusion expressed above, based on thefacts I relayed in our discussion, that a Hart-Scott filing is not required inconnection with the described transaction. As always, I greatlyappreciate your time and assistance.
Very truly yours,
[1] (Redacted)s optionconfers theright upon exercise to acquire from (redacte) 100% of the membershipinterests of (redacted) Holding Company, LLC (redacted).(Redacted)s only asset is 100% of the outstanding votingsecurities of (redacted) company. Based on advice from the FTC PremergerNotification Office, the parties filed on the transaction as an acquisition ofvoting securities.
[2] Item 3 of (redacted)sNovember 13 Hart-Scott filing referenced the merger agreement and indicatedthat a filing regarding the merger would be made in the nearfuture. As indicated, however, the merger agreement has now beenterminated, and there will thus be no such filing.