Question
(redacted)
October 10, 1985
Andrew Scanlon
Premerger Notification Office
Room 303, Federal Trade Commission
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mr. Scanlon:
This is to confirm the telephone conversation you and I had on October 7, 1985, with (redacted) also participating. You advised us that no premerger notification filing would be required with respect to the transaction hereinafter described, in which my firm represents the purchasers and (redacted) represents the sellers.
The sellers consist of a parent company and several of its wholly owned subsidiaries. The parent company has over $100,000,000 in assets.
The purchasers consist of a newly formed parent company with minimal capitalization, and several of its newly formed subsidiaries, all of which are also minimally capitalized. The consolidated balance sheet of the parent company will have far less than $10,000,000 in assets, and neither the parent nor its subsidiaries will have had any sales.
The parent company on the purchasing side is owned by five individuals, on or more of whom have in excess of $10,000,000 in assets. None of the five individuals owns 50% ore more of the parent company. None of the five individuals has the contractual right to designate a majority of the directors of either the parent company or any of its subsidiaries.
The purchasers will pay the sellers approximately $40,000,000 to $50,000,000 for assets of the sellers, the exact amount to be determined by an audit that is yet to be conducted. The consideration will take the form of two zero coupon notes, maturing in five years, issued by the parent on the purchasing side and totalling [sic] (redacted). The balance of the purchase price will be paid in cash, and will be financed by institutional lenders who will take a security interest in the assets newly acquired by the purchasers. The financing will be closed at the same time the purchase transaction is consummated. Although there will be cross-guarantees of the debt involved among the newly formed entities on the purchasing side, none of the five shareholders of the newly formed parent corporation will guarantee any of the debt.
One other factor, which we did not describe to you, but which we believe does not affect the premerger notification issues, is that one of the sellers will be leasing real property back from one of the purchasers, and the property and the lease proceeds may be pledged by the purchaser to secure the debt described above. Although this feature of the transaction might conceivably be construed as an indirect guarantee by one of the sellers, it does not appear to us to be the kind of guarantee that would trigger a premerger notification filing.
You have advised us that no filing is required with respect to the transaction as described to you in this letter, except, of course, we had not previously described the leaseback feature of the transaction to you. We will assume that the leaseback feature does not alter your conclusion.
Please advise us if you change your conclusion after reviewing this letter, or if there is any additional fact which you need to have in order to confirm your conclusion. If we do not hear from you in the near future, the parties will rely on your stated conclusion, and will close the transaction described in due course, without making any premerger notification filing.
Thank you for your assistance.
Sincerely,
(redacted)
(redacted)
STAFF COMMENTS: I concur Patrick 10-11-85