Question
August 12, 2009
Michael B. Verne
Premerger Notification Office
Federal Trade Commission
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580
Dear Mr. Verne:
This letter is toconfirm our discussion of July 29, 2009 regarding whether the transactiondescribed below would trigger the premerger notification and filingrequirements of the Hart-Scott-Rodino Act ("HSR"). We concludedduring our conversation that no such notification or filing is required.
Company A is a North Carolina non-profit hospital system, which owns and operates two licensed, acute carehospitals. Company B is a North Carolina hospital authority, which owns andoperates one licensed, acute care hospital. Company A and Company B intend toform a joint operating company ("JOC") that will be organized as a North Carolina non-profit corporation. The JOC will operate Company A's and Company B'shospitals as a unified healthcare delivery system. Company A and Company B willserve as the JOC's sole corporate members. The JOC's board will initiallyconsist of twelve (12) members, with four (4) directors appointed by Company A,four (4) directors appointed by Company B, and four (4) directors appointed onan at-large basis. 1
Company B wascreated under the Hospital Authorities Act, codified at Chapter 131E-15 etseq. of the North Carolina General Statutes. Company B's board is appointedby the County Board of Commissioners for the county in which Company B operates.Hospital authorities are defined by statute as a "public body and a bodycorporate and politic." N.C.G.S. 131E-16(14). The Hospital AuthoritiesAct provides, among other things, that North Carolina hospital authoritiesshall have the power of eminent domain and the power to issue revenue bonds.
N.C.G.S. 131E-24, -26.
We have reviewedthe financial statements for Company A and Company B that were prepared in theordinary course of business in September 2008. Based on our review, wedetermined that neither entity has total assets or net sales in excess of$130.3million.
In light of theabove, we concluded that an HSR filing will not be required with respect to theformation of the JOc. This determination is based on two principles. First, neitherparty meets the size-of-person test under 15 U.S.c. 18a(a)(2). Second, givenCompany B's status as a North Carolina hospital authority, the transaction isexempt from notification under 15 U.S.C. 18a( c)( 4) as a "transfer toor from ... a State or political subdivision thereof."
Please let me knowif I misinterpreted our discussion or if you have any questions about theforegoing. Many thanks for your assistance in this regard.
Footnote
1 The JOC will ultimately enter into a managementservices agreement ("MSA") with Company C, another North Carolinahospital authority. Pursuant to the MSA, Company C will manage the JOC'sday-to-day operations, but Company C will not acquire any voting securities orassets in connection with the MSA.