Question
November 21, 2006
BY EMAIL TO: mverne@ftc.gov
B.Michael Verne
PremergerNotification Office
BureauOf Competition, Room 303
FederalTrade Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
Re: Hart-Scott-Rodino AntitrustImprovements Act: Reportability of Certain Transactions
Dear Mr. Verne:
The purpose of this letter is to set forthin writing part of a telephone conversation we had yesterday relating toexemptions from the filing requirements under the Hart-Scott-Rodino AntitrustImprovements Act (the "Act") for certain transactions describedbelow. I have received additional timing information that is set forth below.It is assumed that the size-of-the-parties test is satisfied.
Partnership A has formed a new limitedpartnership, Partnership B. Pursuant to a contribution agreement, an indirectwholly owned subsidiary of Partnership A will contribute a 66% interest incertain limited liability companies and limited partnerships (collectively, the"Assets") to Partnership B in exchange for the solegeneral partner interest in Partnership B, all of the limited partner interestsin Partnership B and the right to receive a specified amount of cash fromPartnership B that is in excess of $56.7 million.
Thereafter (it is contemplated to beimmediately thereafter, but there could be a delay), Partnership B will borrowfunds under a credit agreement and will complete the sale of additional limitedpartner interests in a registered offering to the public for an amount inexcess of $56.7 million. As a result of the sale of limited partner interests,Partnership A will no longer be the ultimate parent entity of Partnership B,and Partnership B will be its own ultimate parent entity, but Partnership Awill continue to own approximately 28% to 35% (depending on the amount oflimited partner interests sold to the public) of the interests in PartnershipB, including its sole general partner interest. Part of the proceeds fromborrowed funds and from the public sale of limited partner interests will beused by Partnership B to pay the indirect wholly owned subsidiary ofPartnership A the cash amount due under the contribution agreement.
The acquisition of the 66% interest inthe Assets by Partnership B will be exempt from the filing requirements underthe Act under 16 C.F.R. 802.30 because, at the time of the acquisition, Partnership A is the ultimateparent entity of Partnership B, indirectly owning 100% of the interests inPartnership B. The acquisition of limited partner interests in the public salewill also be exempt because no individual or entity will hold 50% or more ofthe profits interest in Partnership B or hold the right to 50% or more of theassets of Partnership on its dissolution.
The transactions should not raisesubstantive antitrust issues because actual control of the Assets will notchange. Partnership A controls the Assets prior to the transactions through itsindirect ownership of the entity holding the Assets, and Partnership A willcontinue to control the Assets after the transactions through its indirectownership of the general partner of Partnership B.
Please let me know if you agree with my conclusionsthat the transactions would be exempt from the filing requirements under theAct. Should you have any questions or desire any additional information, pleasecontact me at your earliest convenience. My direct telephone number is(redacted). Thank you for your assistance.