Question
September 26, 2007
B. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
7th & Pennsylvania Avenue, NW
Washington, DC 20580
Re:HSR Exemption for the Proposed Acquisition of Assisted Living Businesses
Dear Mike:
In follow-up to our conversationon September 24, 2007, I am writingto confirm my understanding that the proposed acquisition described below isnot reportable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,as amended ("HSR Act").
Our client proposes to acquireall of the assets of various entities that you can assume for the purposes ofthis letter are commonly controlled. The entities to be acquired are all in thebusiness of operating assisted living centers for seniors. In these assistedliving facilities, residents receive a range of residential and personal careservices, including in some instances medical care. However, these are notnursing homes (i.e., establishments primarily engaged in providing inpatientnursing and rehabilitative care).
The value of the overalltransaction exceeds $100 million. However, the fair market value of the assetsbeing acquired attributable to medical care, and any separate businessesconducted on the residential property (e.g., a beauty shop) being transferred,along with the space in which those businesses are conducted, will not inaggregate exceed $59.8 million, the HSR size-of-transaction threshold.
You confirmed the following:
The transactiondescribed above is HSR exempt. Specifically, the acquisition of assisted livingfacilities qualifies for HSR exemption under 16 C.F.R. 802.2(d) as a transfer of residential property so long asthe fair market value of the assets attributable to medical care, and any separate businesses conducted on theresidential property (e.g., a beauty shop) being transferred, along with the space in which thosebusinesses are conducted, does not exceed the $59.8 million size-of-transactionthreshold.
Services routinelyoffered by assisted living facilities -- such as meals, cable television, housekeeping or assistance non-exempt business that must bevalued for purposes of 16 C.F.R. 802.2(d)(3). Rather, providing theseservices would be exempt along with any other assets incidental to theownership of the primarily residential property. Similarly, any offices used torun the assisted living business (whether or not on-site at a facility) andrelated business assets (including but not limited to computers, furniture,fixtures, phone systems) also would qualify as exempt assets incidental to theownership of the residential property.
The transfer of adining room or cafeteria where meals are served would not need to be separatelyvalued as a non-exempt asset. Rather, all common areas (e.g., recreation rooms,lobbies, dining rooms, cafeterias, exercise facilities, etc.) associated withotherwise exempt residential property also are exempt.
Pursuant to 16 C.F.R. 802.4, the residential propertyexemption remains applicable even if the transaction is structured as the acquisition of non-corporateinterests (e.g., limited liability company interests or limited liability partnershipinterests) or the acquisition of voting securities.
Please let me know as soon as possibleif you disagree with any of the conclusions discussed above, or if I havemisunderstood any aspect of your advice. Thank you for your assistance in thismatter.