Question
From: (redacted)
Sent: Friday, January 16, 2004 8:02 PM
To: Verne Michael
Subject: Question regarding HSR interpretation (7269-014)
Importance: High
Mr. Verne:
I am working on a transaction (myfirm represents the seller) in which one of the (redacted) offices representsthe buyer, and the applicability of the HSR statute is uncertain. (Redacted) of (redacted) who isworking with the M&A attorneys on this ma matter, suggested that I contactyou or Nancy Ovuka at the PNO to get your thoughts on the following issue, and I'd appreciateyour help. I have a working knowledge of HSR basics (as an M&A attorney), but not enough depth tofeel comfortable about this issue. If you feel uncomfortable responding viaemail, please feel free to call me.
In the proposed transaction, theseller would sell assets to a buyer that is a totally new entity with no assetsand no business history. Buyer would fund the acquisition of my client throughacquisition funding that should cone in contemporaneously with the acquisition,and has no controlling person that would constitute its parent for HSR purposes. Theseller's "ultimate parent entity" is large enough that it probablymeets the $100 million assets/revenues size of person test, and the deal sizeexceeds the $50 million size of transaction test but is not large enough tomake the size of persons tests irrelevant (i.e., it is below $200 million).Under section 801.11(e)(1) of the HSR regulations, it appears that the cash used in theacquisition will be deducted from the buyer's assets for purposes of measuringwhether it has $10 million in assets, if the buyer entity does not have "aregularly prepared balance sheet." If that is the case, buyer won't meetthe $10 million assets or sales test.
I am trying to understand how tointerpret "regularly prepared" in the context of an entity that isbrand new. My interpretation is that the new entity would not have a regularlyprepared balance sheet, and therefore 801.11(e)(1)I; would apply. (Redacted) hasreferred me to an ABA Antitrust Section publication, Premerger NotificationPractice Manual paragraphs 141 and 142, which I am hoping to obtain. I amwondering if there is something authoritative you can direct me to, or if thereis an established interpretation within the PNO, on this issue.
Many thanks for your time.