Question
January 7, 2008
Michael Verne
Federal Trade Commission
Bureau of Competition
Premerger Notification Office
600 Pennsylvania Avenue, NW
Room 303
Washington, DC 20580
RE: HSR Exemption Pursuantto 802.1(d)(4)
Dear Mr. Verne:
Via Email
This letter is toconfirm our conversation of today. Our client, X, a foreign corporation,intends to purchase certain assets from Y, a U.S. corporation. Thesize-of-the-transaction exceeds $200 million (as adjusted) and therefore thesize-of-the-parties test does not apply (though it would be met in any event).The assets being purchased from Yare primarily used computers, computerprocessors and servers. X is also acquiring from Y various contracts, primarilywith shipping companies.
The assets haveheretofore been used by Y to provide certain internal logistics services. Thatis, Y would use these assets to coordinate and monitor the shipment and storageof its products internally, for example from a manufacturing facility in onecountry to a storage facility in another country.
Y will now beoutsourcing these logistics services to X pursuant to an agreement executedbetween the parties. In addition, X and Y have entered into an Employee MattersAgreement, as X will be assuming responsibility for certain of Y's employeeswho previously provided these logistics services, Although the acquired assetswill be used primarily to provide logistics services to Y, X will likely usethe assets to provide similar services to third parties, although no such thirdparty customers have been yet identified.
X will not beproviding any marketing or distribution services to Y. Indeed, it is ourunderstanding that the acquired assets were not used for marketing or distributionpurposes. However, X is acquiring certain leases to warehouses, whichwarehouses will be used for storage attendant to distribution, but these leasesare not considered assets.
It is ourunderstanding that the above-transaction will fall within the exemptionprovided by 802.1(d)(4). The acquired assets-largely computers and computerequipment-are used durable goods which are designed to be used repeatedly andhave a useful life of greater than one year. In addition, the goods have beenused to provide management and logistics support services for the acquiredparty's business operations. While the sort of logistics services describedabove do not fall cleanly within one of the examples provided by the exemption(i.e., accounting, legal, purchasing, payroll, billing, and repair andmaintenance), they are the sort of services covered by the exemption and arenot tantamount to distribution. In addition, as required by the exemption, theacquired party will now be outsourcing these services to a third party, in thiscase the buyer, X. To the extent there are assets attendant to distributionbeing acquired, the value of such assets falls below thesize-of-the-transaction threshold assuming the managerial and administrativeassets being acquired are exempted. Thus, no HSR filing will be required.