Question
February 21, 2008
B. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
7th & Pennsylvania Avenue, NW
Washington, DC 20580
Re: HSR Treatment of Liabilities
Dear Mike:
In follow-up to our conversationon February 19, 2008, I am writing to confirm my understanding that the proposedacquisition described below is not reportable under the Hart-Scott-Rodino Antitrust ImprovementsAct of 1976, as amended ("HSR Act").
Proposed Transaction
Pursuant to a proposedtransaction, Buyer intends to acquire 100% of the limited partnership interests of Acquired LP fromSellers. As a part of this transaction Buyer also will acquire 100% of the limited liability companyinterests of Acquired LLC which is the general partner of Acquired LP and holds a minority interest in Acquired LP. Forthe LP and LLC interests, there is a cash purchase price above $50 million but lessthan the HSR size of the transaction test. However, Buyer also will be assumingdebt of and paying off debt of Acquired LP as a part of the transaction. If thevalue of the debt being assumed and paid off is included in the HSR valuation,the valuation of the transactionwould be above the HSR size of the transaction test. The debt of Acquired LPthat Buyer is payingoff is debt owed to one or more of the Sellers. With regard to the additionaldebt of Acquired LPowed to one or more third party that Buyer is assuming, Sellers are beingreleased from aguaranty of that debt as a part of the proposed transaction.
Conclusions
You confirmed the following:
(1) The proposed transaction is notHSR reportable as its value is below the HSR size of the transaction test;
(2) Acquisitions conferring control of a limitedpartnership, limited liability company or other noncorporate entity such as in the proposedtransaction are treated as comparable to those involving voting securities with respect toassumed liabilities -- the value of the assumed liabilities is not included inthe acquisition price for HSR purposes;
(3) Debt of Acquired LP is notincluded in the HSR valuation of Acquired LP whether Buyer assumes the debt of Acquired LPor pays off that debt before closing, at closing or following closing;
(4) Debt of Acquired LP is notincluded in the HSR valuation whether some or all of that debt being paid offor assumed by Buyer is debt owed to the Sellers of Acquired LP or thirdparties; and
(5) Debt of Acquired LP is notincluded in the HSR valuation even if Sellers of Acquired LP are released fromtheir guaranty of any debt of Acquired LP as a part of the transaction.
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.