Question
From:(redacted)
Sent:Friday, August 18, 2006 4:43 PM
To:Verne, B. Michael
Cc:(redacted)
Subject:Confirmation of HSR Guidance: Exemption For Acquisition of
Timeshare Facilities ( 802.2 (d), 802.2(e), 802.4)
August 18, 2006
Mr.Michael Verne
PremergerNotification Office Federal Trade Commission 600 Pennsylvania Ave., NW
Washington, DC 20580
Re: Exemption For Acquisition ofTimeshare Facilities ( 802.2(d), 802.2(e), 802.4)
Dear Mike:
I am writing to confirm the guidance andinterpretations you provided to (redacted) and me in a telephone conversationon August 2, 2006.
The proposed transaction consists of the acquisitionof all of the interests in an LLC that is engaged primarily in the acquisition,development, and marketing of vacation ownership interests, which are commonlyknown as "timeshares" ("Seller"). The Seller operates abusiness which sells timeshare intervals under a points-based system, and itmarkets these vacation ownership interests to consumers who purchase pointsthat give them membership into an owners club. Members of the club have theright to use various timeshare resorts developed by the Seller through aninternal exchange reservation system. Members may also exchange their points throughan external exchange program, or they may use the points to purchase a varietyof products and services offered by Seller, its partners, and its affiliates(such as airline discounts, hotel nights, and car rentals), which togetheramount to a small fraction of Seller's revenue. Seller administers all aspectsof this club program, including the assignment of occupancy rights andproviding fulfillment services. Seller also finances the purchase of thevacation ownership interests to consumers, manages resorts, and rents outunused units.
The assets of the Seller consist primarily of threeclasses: cash and cash equivalents; inventory (that is, unsold units orpoints); and mortgages and installment contracts receivables associated withthe sale of the points.
As amended, 16 C.F.R. 802.4 provides in relevant part: "An acquisition of ... non-corporateinterests in an unincorporated entity whose assets together with those of allentities it controls ... consist of assets whose acquisition is exempt from therequirements of the Act pursuant to ... this part 802 ... is exempt from thereporting requirements if the acquired ... unincorporated entity and allentities it controls do not hold non-exempt assets with an aggregate fairmarket value of more than [$56.7 million]."
Weunderstand that the premerger notification office staff considerstimeshare-related assets such as these to be exempt, either as incidental tothe ownership of residential property (under 802.2(d)) or as incidental tothe ownership of a hotel or motel (under 802.2(e)). Therefore, as long as theSeller does not have non-exempt assets with an aggregate fair market value of$56.7 million or more, the proposed acquisition would be exempt from HSRreporting requirements under Rule 802.4.
Please confirm that you agree with these conclusionsand that we have correctly understood your advice. Thank you for your kindassistance.