Question
From: (redacted)
Sent: Tuesday, March 30, 2004 1:45 PM
To: Verne,B. Michael
Subject: Follow-upquestion re acquisition by 50% owner
Mike,
As a follow-up question to the issues we discussedyesterday by phone, in which you indicated that, in my hypothetical (A acquiresa 50% ownership interest in Company X in a transaction beneath jurisdictionallimits, and more than a year later, acquires the rest in a transaction thathits the $50 million mark), the second acquisition would be exempt underSection 7A(c)(3), would the result differ depending upon the nature of CompanyX's entity? If X is a corporation, the result is probably clear. It is exempt.
But what if X is an LLC? I have found language in atreatise (Axinn, Fogg, Stoll & Prager, Acquisitions Under theHart-Scott-Rodino Antitrust Improvements Act) that if X is a partnership, A'sincrease to 100% would be treated as an acquisition of the assets of thepartnership and, therefore, the transaction "may be subject to theAct." (Section 6.04[3], page 6.25). The same treatise goes on to say that
"If the joint venture is structured as an LLC, a 50%joint venturer who seeks to increase his interest to 100% would have to file anotification form since the acquisition would be treated as an acquisition ofthe assets of the underlying LLC and, hence, potentially reportable." (emphasisadded) The treatise cites FTC Formal Interpretation 15 for the observation thatif, upon formation of the LLC, the 50% venturer filed a notification form withthe FTC, there would then be no requirement to again file re the secondtransaction, on the theory that the "combination" had already beenreviewed, but the writers state that "there does not seem to be a basis inthe HSR Actor Rules for this conclusion."
Hence, my continued uncertainty. Was you response yesterdayconfined to the assumption that Company X must be a corporate entity for theSection 7A(c)(3) exemption to apply? Is there a distinction when X is an LLC?Is the treatise either incorrect, out of date, or raising a red herring? Is theanswer simply not clear...?
Thanks somuch for your assistance.