Question
From: (redacted
Sent: Friday, July 06, 2007 2:05 PM
To: Verne, B.Michael
Subject: FW: HSR inquiry
Mike: I just realized that I neglected to attach those PNO interpretationsto my prior email. Thanks in advance for your help
----- Original Message
From: (redacted)
Sent: Tuesday, July 03, 2007 2:34 PM
To: mverne@ftc.gov
Subject: HSR inquiry
Hi Mike,
I have a transaction that mayrequire a HSR filing, but, because of the relatively unique transactionstructure, I wanted to run the facts by you for your thoughts. Let's assumethat the size-of-person test is satisfied.
My firm represents the buyer in a purchase of an operatingbusiness. The current plan is that the seller would assign the assets necessaryto operate the business as follows: (i) all of the tangible personal propertyand inventory would be assigned to a newly organized LLC (approx. $30-35 millionin value), and (ii) all of the other assets necessary to the business(including some of the accounts receivable related to the business, etc.) wouldbe assigned directly to the buyer (approx. $5-10 million in value). Forpurposes of this inquiry, let's assume that the FMV of those assets is $40million.
In addition, the seller would eithercontemporaneously (a) assign to the LLC (and the LLC would assume)substantially all of the liabilities related to the business, or (b) assigndirectly to the buyer (and the buyer would assume) substantially all of theliabilities related to the business. To be clear, those liabilities were theseller's liabilities before the closing. Let's assume that they total $20million in value (putting the transaction just over the size-of-transactionthreshold, if those figures need to be aggregated).
Further, the buyer may - at orpromptly after the closing - either (y) merge the target LLC with and into thebuyer, or (z) transfer all of the LLC's assets and liabilities (if the LLC hasassumed the liabilities of the business) to the buyer itself and then dissolvethe LLC, with - in either case - the result being that the buyer would succeed(by assignment/assumption and possibly also by merger) to all the rights and obligationsof the target business.
The reason I'm running this structure by you is because ithas characteristics of both an asset and a voting securities/non-corporateinterest deal. Ordinarily, when determining the size-of-transaction, the valueof the target entity's liabilities is not included in the valuation. See ABA manual interpretation no. 114, attached. However,this structure has some traits that are similar to those contemplated in ABA manual interpretation no. 97, attached, because thebuyer's (direct or indirect) assumption of the business' liabilities could bedeemed to be part of the consideration being paid to the buyer . See 16 CFR801.10(c)(2). Given this proposed transaction structure, do we need toaggregate the $20 million with the $40 million, which would necessitate a HSRfiling?
Please let me know if you have questions about thetransaction or if your conclusion is based on facts or assumptions not raisedin my email.
As always, thanks in advance for your assistance, Mike.