Question
(redacted)
Linda Heban, Esq.
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580
Re: Hart-Scott-Rodino Act Filing for agreement (Agreement) by and between (redacted)
Dear Linda:
This is to confirm the telephone conference call held on Tuesday, January 20, 2987 among yourself, (redacted) and myself, regarding the above referenced matter. As was related to you in the conversation, the agreement provides for the acquisition of certain (redacted) assets out of a (redacted). The assets are to be acquired by a newly formed limited partnership (the partnership) which will be 88% owned by (redacted) and 12% owned by (redacted). The partnership has not yet been formed and, of course, has no regularly prepares balance sheet. The acquisition will be financed with cash which will be provided by (redacted).
The Agreement provides that (redacted) shall obtain or provide additional working capital financing to the partnership up to the sum of &10 million to the extent required and commercially reasonable to maintain and operate assets acquired. It is anticipated that this working capital commitment will result in loans or guarantees by (redacted) to or on behalf of the partnership in varying amounts. These loans or guarantees will be secured by a first priority security interest granted by the partnership to (redacted) in the accounts receivable and inventory generated by the partnership assets after closing date.
It is also anticipated that the amount of these loans or guarantees will probably total less than $10 million for the foreseeable future.
I would like to confirm the opinion you expressed that the above described transaction does not meet the jurisdictional requirements of the Hart-Scott-Rodino Act (The Act). Specifically, the transaction does not fulfill the size of the parties test as set forth in Section 7A(a)(2) of the Act, which requires that the acquiring person has total assets of $10 million or more. Rule 801-11(c)(2) of the Act, as interpreted by the Federal Trade Commission informal interpretation Number 104, states that the cash to be used in consideration for an acquisition by a newly formed partnership, without a regularly prepared balance sheet, is never included as part of total assets for purposes of the size of the parties test. Consequently, the partnership will have total assets of less than $10 million at the time it makes the acquisition pursuant to the Agreement and will not fall within the Acts premature filing requirements.
I understand that should I not hear from you in writing, you concur with the opinion restated in this letter.
Thank you for your consideration regarding this matter.
With kindest regards, I remain
Sincerely yours,
(redacted)
cc: (redacted)