Question
August 11, 2005
VIA Facsimile
Janice Johnson
Premerger Notification Office
Federal Trade Commission
Washington, D.C.
Re: Application of Exemption for Transaction in Ordinary Courseof Business
Dear Ms.Johnson:
I am writing as you suggested in our telephone call this morning. Our client,company A, is in the business of designing, manufacturing and selling semiconductorsand related software far various uses. Presently the semiconductor"wafers" that are manufactured at Company A's facility are shippedoverseas to undergo further manufacturing steps, after which they are sold ascomponent parts to third parties to be integrated .into various electroniccomponents such as computers or telephones. The company has announced itsintention to close its last wholly-owned semiconductor wafer fabrication plant,which is located in the United States. (Company A will retaina 51% interest in a foreign joint venture that manufactures semiconductors,)Company A was unable to sell the plant as an ongoing business, so it willseparately sell the building, land, and equipment; terminate or relocate theemployees; and retain related intellectual property.
The equipment to be sold consists of various high-tech guts that are used tofabricate the semiconductor wafers. The company expects to sell all of theequipment together to one buyer. There will be no customer lists or receivablesinvolved in the transaction. You may assume that the value of the equipment isin excess of the $53 million HSR minimum.
The prospective buyer is a foreign company that is in the nature of a reseller,which is in .the business of buying and then reselling or leasing equipment ofthis type. The buyer s. not an end user or a competitor of Company A, 'Weexpect the buyer to resell the equipment in separate units or subgroups, not asa whole,
We would appreciate your confirmation that this transaction qualifies for anexemption under 802.1 of the HSR rules, asan, acquisition of goods in the ordinary course of business, of under any otherexemption that may apply. First, we believe that the transaction raises nosubstantive antitrust concerns. Second, we do not believe that this transactionconstitutes the sale of the assets of an operating unit in any meaningfulsense; the assets are not "the equivalent of a business ...."See 61 Fed. Reg. at 13668 (1996). It would be necessary to have real estate, abuilding, staff, intellectual property, anal rate materials in order to producethe product, and those are not part of the contemplated transaction sinceCompany A is not selling the entire factory as a going concern. Nor have theassets been "operated by the acquired person as a businessundertaking," Rule 801.2(a), since Company A has not directlyderived revenue from sales to third parties of the wafers manufactured at thisplant. See Statement of Basis and Purpose, 61 Fed- Re& 13,666 at 13,670(1996). Third, the transaction would constitute the acquisition of used durablegoods within the meaning of 802.1(d)(1) because "the goods are[being) acquired and held solely for the purpose of resale or leasing to anentity not within the acquiring person ... ." The acquiring person is abona fide dealer/reseller "whose business is to purchase and sell usedgoods," 61 Fed. Reg. at 13671, of the same type as these assets. In thisregard, the transaction is similar to Examples 6 and & in 802.1.
Of course, if you need further information, do not hesitate to contact me bytelephone or email. As the parties are hoping to execute a preliminaryagreement by the end of next week, we would very much appreciate your promptattention to this inquiry. Thank you again.