Question
June 4, 2004
Via Federal Express
B. Michael Verne
Federal Trade Commission
Premerger Notification Office
Room 303
6th Street and Pennsylvania Ave., N.W.
Washington, D.C. 20580
RE: Two Purchases from Identical Seller
Dear Mr. Verne:
This letter will serve to confirm youroral advice by telephone this morning. Since the parties will be relying on myunderstanding of your advice to close the first transaction shortly, pleaseadvise me at your earliest convenience if I have misunderstood your comments.
Statement of Facts
Seller, a corporation, controls, amongother assets, Subsidiary 1 ("Sub 1 ") and Subsidiary 2 ("Sub2"). The businesses of Sub 1 and Sub 2 are unrelated. Buyer, also acorporation, is negotiating with Seller to purchase Sub 1 and Sub 2, pursuantto what will, if the parties reach final agreement, be two separate contracts.Buyer intends to purchase all of the voting securities of Sub 1 for a pricesubstantially below $50 million. (The fair market value is similarlysubstantially below $50 million.) Since the transaction will be in cash and theprice is relatively small, the parties wish to proceed to close the sale of Sub1 as soon as possible. The sale of Sub 1 is not contingent upon the sale of Sub2, although the purchase price for Sub 1 will be somewhat higher (but stillsubstantially less than $50 million) if the sale of Sub 2 is not completed.
Buyer proposes then to merge Sub 2 into asubsidiary of Buyer. The value of Sub 2 substantially exceeds $50 million, anda Hart-Scott-Rodino filing will be required. Implementation of the acquisitionof Sub 2 will be significantly more complex and will take significantly longerthan the sale of Sub 1 because, among other reasons, it will require a filingwith the Securities and Exchange Commission.
Application of the Regulations
As we agreed this morning in our telephone conference, Buyer mayproceed to close on the purchase of Sub 1 (with a value of less than $50 million)immediately, without making a Hart-Scott-Rodino filing, since that transactionwill not involve an acquisition of stock or assets with a value in excess of$50 million.
A Hart-Scott-Rodino filing will be required prior to theconsummation of the merger with Sub 2, with a value in excess of $50 million.However, in making that filing, Buyer and Seller need not include in theirfilings the already-consummated sale of Sub 1 since, under 16 C.F.R.801.14(x), the stock of Sub 1 would not be "voting securities of theacquired person" at that time, since Sub 1 will become a part of theBuyer's Person upon consummation of the purchase of all of the votingsecurities of Sub 1.
If any of the foregoing is not consistent with your understanding,please so advise me at your earliest opportunity since the parties will beproceeding with the sale of the stock of Sub 1. Thank you for your courtesy andassistance.