Question
From:(redacted)
Sent:Monday, December 18, 2006 11:13 AM
To:Verne, B. Michael
Subject:Joint Venture HSR filing notification
Michael:
Ihave never had to confront the question of when the formation of a JV requiresa filing, and would appreciate some guidance with respect to the following:
Background
CompanyA and Company B will form a 50/50 joint venture (JV). Both Company A andCompany B have sales or assets in excess of $113 million.
Scenario1: At the time the JV is formed, Company A will contribute $2 million in assetsand Company B will contribute $2 million. Thus, the JV will have total assetsof $4 million.
Conclusion:The formation of this JV is not reportable.
Scenario2: At the time the JV is formed, Company A will contribute $2 million in assetsand Company B will contribute $2 million. In addition, Company A and Company Bagree at the time the JV is formed to jointly purchase property worth $80million and contribute that property, once purchased, to the JV. Conclusion:Because Company A and Company B agreed at the time the JV was formed tocontribute assets in excess of $11.3 million, and the JV (acquired person) hadassets in excess of $56.7 million, the JV is reportable at the time it isformed. (FMV of the land is in excess of $56.7 million, so the value of thetransaction is in excess of $56.7 million)
Scenario3: At the time the JV is formed, Company A will contribute $2 million in assetsand Company B will contribute $2 million. The purpose of the JV is to explorewhether Company A and Company B can obtain approval for a building project.Later, the JV obtains approval and Company A and Company B contribute land tothe JV worth $80 million. The land is to be used for the building project.
Conclusion:This transaction is not reportable at the time it is formed because the JV didnot have sales or assets in excess of $11.3 million; and at the time offormation, the JV did not have a FMV in excess of $56.7 million.