Question
March 31, 2005
Via Facsimile and Regular Mail
Nancy M. Ovuka
Compliance Specialist
Premerger Notification Office
Bureau of Competition, Room 303
Federal Trade Commission
6th Street and Pennsylvania Ave., N.W.
Washington, DC 20580
Re: Acquisition of Water Rights
Dear Nancy:
Iam writing to confirm my understanding of your Hart- Scott-Rodino ("HSR") analysis of a transaction I discussed with you during a March 21, 2005, telephone call.
Specifically,we discussed the following transaction: Company A intends to purchase certainshares of Company B - a nonprofit corporation - for approximately $100 million.Company A is acquiring the shares in order to obtain the water rightsassociated with those shares, based on the understanding that each share is, ineffect, a water right.
Itis your understanding that because the Premerger Notification Office deemswater rights as "natural resources" this acquisition falls within theHSR exemption set forth in 16 C.F.R. 802.2(c) Unproductive real property. That exemption states that"unproductive real property is any real property, including ... naturalresources ... that has not generated total revenues in excess of $5 millionduring the thirty-six (36) months preceding the acquisition." Furthermore,the Statement of Basis and Purpose to 802.2 states the following:"'Natural resources' refers to any assets growing or appearing naturallyon the land, such as timber and mineral deposits." (61 FR 13675, March 28, 1996).
Essentially,all of the consideration paid by Company A in the transaction described aboveis for the water rights (i.e., natural resources) represented by the sharesCompany A is acquiring from Company B. Additionally, those water rights havenot generated total revenues in excess of $5 million during the precedingthirty-six (36) months. Therefore, this transaction is exempt from thereporting requirements of the HSR Act and, consequently, no HSR Notification need be made prior to consummating the transaction.
Ifyou should disagree with the conclusions outlined above, or if you haveadditional questions regarding this transaction, please contact me at(redacted) or at (redacted) as soon as possible. Your assistance in connectionwith this matter is very much appreciated.