Question
June 2, 2006
BY FACSIMILE AND U.S. MAIL,
Nancy Ovuka, Esquire
Federal Trade Commission
6th Street and Pennsylvania Avenue, N.W.
Washington, DC 20580
Dear Nancy:
I write to confirmour discussion on Wednesday of last week, in which you advised that theacquisition described below is not reportable under the Hart-Scott-Rodino (HSR)Act and regulations issued by the Federal Trade Commission.
Our client, Company A, is in thecold storage business. Company A operates public refrigerated warehouses withinthe United States, andprovides refrigerated storage and distribution services to the food industry.Company A stores customer product against warehouse receipts (i.e., thecustomer delivers products to Company A and later collects the products ordirects their delivery to third parties, but the customer does not contract forparticular space within Company A's facilities). In other cases, Company Aenters into multi-year storage agreements with customers (in which, again, thecustomer does not generally contract for particular space within Company A'sfacilities). In some cases, Company A leases specific space in its warehousesto customers. Company A's parent has investments in refrigerated warehousingand other industries around the world.
Company B is in the food processingindustry and owns, among other assets, five cold storage facilities, which arecurrent used exclusively for the storage of Company B's inventory. Company Aproposes to acquire the five warehouses, for a sum that exceeds the minimumsize of transaction HSR thresholds. As part of the proposed transaction,Company B will commit to continue to use a portion of the transferredfacilities, and to pay Company A at agreed upon storage rates for such use.Company A plans to utilize the balance of the transferred facilities as publicrefrigerated warehouses, operating them in the manner in which it operates itsother warehouses.
You advised us that the acquisition of Company B'swarehouses by Company A, as described above, is not a reportable transaction,and that we may rely on the exemption for the acquisition of "warehousesand assets incidental to the ownership of ... warehouses" set forth inrule 802.2(h). We discussed the fact that the proposed transaction will includethe concurrent transfer of other assets incident to the maintenance and use ofthe transferred facilities (such as lift trucks, racking, and refrigeration equipment)and you advised that the transfer of those ancillary assets would also beexempt under rule 802.2(h).
Please call me promptly if the abovedoes not accurately reflect the views of the Premerger Notification Office.