Question
From: (redacted)
Sent: Tuesday, May 03, 2005 2:28 PM
To: Verne, B. Michael
Subject: Necessity for Filing
Mike,
I hope this e-mail finds you doing well. It has been a long time since we have spoken,but I have another question that I hope you can assist me with. My question hasto do with whether a bifurcation of the sale of assets from a seller needs tobe integrated to satisfy the size-of-the-transaction test when all of theassets of the seller will be sold to two different and unrelated buyers for asale price that would reach the threshold on an aggregate basis but would noton an individual basis.
Specifically, we have a client that is currently negotiating and has enteredinto a letter of intent with a buyer ("Initial Buyer") to purchaseall of its assets for a total of approximately $65 million. Thesize-of-the-person test and the size-of-the-transaction test is clearly met ifthis transaction were to go forward.
However, in the course of negotiation, the Initial Buyer has indicated that itdoes not want to purchase the real estate portion of the seller and wouldrather the seller locate a Real Estate Investment Trust or other buyer (the"Real Property Buyer") to purchase all of the real property assets ofthe seller (sale price for the real estate would be in the $30 million range,with the Initial Buyer buying the remaining ~ $35 million in non-real estateassets), and the Initial Buyer would agree to enter into a long term lease agreementwith the Real Property Buyer to lease back the real property following theacquisition of all assets.
Both transactions would take place simultaneously and the Initial Buyer and theReal Property Buyer would not be related in any way save for the leaseagreement for the real property (i.e., there would be no related ultimateparent entity). The primary purpose of the restructured transaction would notbe to avoid the filing requirements of the HSR Act.The primary purposes of the restructured transaction would be for the InitialBuyer (i) to avoid owning real estate in general, (ii) to avoid in any wayincurring any liability related to the ownership of this real property thatcould result from residual liability currently associated with portions of thisreal property, and (iii) to reduce the initial purchase price it will pay.
It is my understanding and interpretation that based upon this bifurcated salefact pattern that a HSR filing would not be required. Thisinterpretation is based upon the assets being ultimately owned by no one personin excess of $53 million and Rule 801.90 not being applicable. If you disagreeor have any suspicions, I would greatly appreciate it if you could please pointme in the direction of any rules or interpretations that I should review.