Question
(redacted)
May 9, 1985
Mr. John Sipple
Bureau of Competition
6th Street and Pennsylvania Avenue
Room 301, Federal Trade Commission
Washington, D.C. 20580
Dear Mr. Sipple:
Pursuant to the telephone conversation between (redacted), myself, and other members of our office on May 7, 1985, and our conversation of May 9, 1985, I am writing to request an informal interpretation, based upon the following fact situation, of the obligations of (redacted), to file a notification under the Hart-Scott-Rodino Act of 1976 (Act). For purposes of this request we would like you to assume that the transaction described below involving (redacted) satisfies the so-called Commerce Test, Size of the Parties Test, and Size of Transaction Test set forth in the Act and the accompanying regulations.
(redacted) (buyer), proposes to purchase substantially all the operating assets of (redacted) al of which are (redacted) are directly or indirectly controlled by (redacted). No individual shareholder presently owns 50% or more of the voting shares of (redacted). It has been determined under the present ownership structure (redacted) is the ultimate parent entity, as defined in the Act, of these acquired persons.*
Staff Comment: * line through persons; replaced with entities by reviewer
Contemporaneous or nearly contemporaneous (within 20 days) with the acquisition of the Sellers assets by the Buyer, several transactions involving stock of (redacted) and corporate Sellers and partnership interests of partnership Sellers will take place.
The share transactions will be initiated by shareholders of (redacted) and corporate Sellers and partners of partnership Sellers adopting plans of complete liquidation and dissolution of the respective entities. Certain shareholders of (redacted) which also have equity interest in (redacted), will then make capital contributions of their stock of (redacted) and corporate Sellers and their partnership interest in partnership Sellers to (redacted). (redacted) will in turn contribute the stock and partnership interest to a subsidiary created for this transaction. The new subsidiary will thereafter purchase additional stock of (redacted) and certain corporate Sellers from other shareholders subject to the same or nearly the same terms as those other shareholders would have received after the sale of the assets of Sellers to Buyer and liquidation and dissolution of Sellers.
As a result of the capital contribution of shares and partnership interest by (redacted) to its subsidiary and the subsequent purchase of shares by the new subsidiary, the new subsidiary of (redacted) will hold directly or indirectly more than 50% of stock of (redacted) and other corporate Sellers but only 40% of partnership interests of the partnership Sellers at the closing of sale of assets of Sellers to Buyer. At closing, Sellers will receive cash and a note which is not secured by assets of Sellers but buyer will be liquidated and dissolved and their shareholders and partners, including the subsidiary of (redacted) will hold only cash and their proportionate interest in the note and any rights set forth in the standby letter(s) of credit.
The Act at paragraph (d)(2)(B) provides that the Federal Trade Commission may exempt from the requirements of the Act, classes of persons, acquisitions, transfers, or transactions which are not likely violate the antitrust laws. 15 U.S.C. 18a(d)(2)(B). Pursuant to authority to promulgate rules, the Federal Trade Commission has promulgated Regulation 803.30 to provide informal and formal interpretations of obligations under the Act and the rules for any party to an acquisition. 16 C.F.R. 803.30. While there appears to be no specific exemption set forth in the Act or the regulations which addresses our unique fact situation, paragraph (d)(2)(B) appears to contemplate exemptions for companies like (redacted) in the foregoing fact situation.
In addition, it is our understanding that the purpose of the Act is to enable the government to analyze a proposed transaction before it is consummated in light of the various antitrust laws, including 7 of the Clayton Act. Based upon the foregoing facts, it is our belief that no antitrust issues will arise from the acquisition by a subsidiary of (redacted) of stock of (redacted) and other corporate Sellers nearly contemporaneous with the acquisition of the assets of Sellers by Buyer. The subsidiary of (redacted) will not receive operating assets of Sellers. After closing of the acquisition by Buyer, the Sellers, and in turn (redacted) after liquidation of Sellers, will hold only cash and notes from Buyer. Given the facts outlined above, we believe notification filings by (redacted) will provide the Antitrust Division with the requisite information to review this acquisition under the Act.
The proposed date of closing of the foregoing transaction is July 15, 1985. to enable us to close on the proposed closing date, we respectfully request an interpretation by May 15, 1985, of (redacted) obligation, if any, to file a notification under the Act. Should you conclude the Act does contemplate a filing by (redacted), we respectfully request a determination by May 15, 1985, as notification under paragraph (d)(2)(B) of the Act or the regulations promulgated under the Act.
In anticipation of a determination that (redacted) will not be required to file a notification, we intend to treat the foregoing transaction as an acquisition of assets of Sellers by Buyer. (redacted) and Buyer have, on or before the date of this letter, filed a notification as the acquired company and acquiring company, respectively.
We understand that the Federal Trade commission may have ultimate authority to review this request. We therefore would like you to direct our request to the appropriate parties as soon as possible.
Please contact us upon receipt of this letter to determine the next appropriate step for our request.
Sincerely,
(redacted)
(redacted)