Question
(redacted)
November 11, 1987
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re: Acquisition of Voting Securities of (Redacted)
Dear Mr. Sipple:
(Redacted) requests that the Federal Trade Commission (FTC) investigate a potential violation of the Hart-Scott-Rodino Act (H-S-R- Act) in connection with the acquisition of, and proposed offer to purchase all outstanding shares of (redacted) common stock by (redacted).
On October 29, 1987, (redacted)ed a Schedule 13D with the Securities and Exchange Commission disclosing their acquisition of 2,100,000 shares (redacted) stock valued in excess of $91,000,000. (A copy of the Schedule 13D is attached as Annex 1 hereto.) (Redacted) had been acquired through open-market purchases made without reporting under the H-S-R Act. On November 2, 198(redacted) filed a Schedule 14D-1 in connection with its offer to purchase all outstanding shares (redacted) or more than $1 billion (the Tender Offer). (A copy of the Schedule 14D-1 is attached as Annex 2 hereto).
The purchase (redacted)es and the Tender Offer were made (redacted) newly formed (redacted). However the sole general partners of (redacted) those only business purpose is to act as general partner of (redacted). Pursuant to the Agreement of Limited Partnership of (redacted) (the Partnership Agreement) (attached as Exhibit 6 to the Schedule 13D), the general partners exercise full and exclusive control over the business and affairs of the Partnership. (Partnership Agreement Article IV, at 9-12.) Moreover, in the Schedule 13D, (redacted) discloses that By virtue of his position as a general partner of the Partnership and as controlling person to dispose or direct the disposition of the 2,100,000 shares held by the Partnership. (Schedule 13D, Item 5b, at 13.) Similarly, the Offer to Purchase, filed as an exhibit to the Schedule 14D-1, discloses that the Partnership will be operated under the full and exclusive control of the General Partners, acting jointly or severally. (Offer to Purchase, Section 9, at 11.) In addition, (redacted) obtain the benefit of an increase in, and bear the risk of loss of, the value of the Singer shares purchased by Bilzerian Partners through their significant participation in profits and losses of the partnership.* (Partnership Agreement, Article III, at 7-9.)
Under theses circumstances (redacted) believes that, for H-S-R Act purpose (redacted) the beneficial owner of (redacted) shares held (redacted) and will be the beneficial owner of (redacted) shares acquired in the Tender Offer, irrespective of whether (redacted) is deemed to control the partnership. Under the H-S-R Act a person holds voting securities if that person is the beneficial owner of such securities. (Rule Section 801.1(c).) As explained in the Statement of Basis and Purpose accompanying Rule Section 801.1(c):
The rules do not contain a definition of beneficial ownership. Instead,
the existence of beneficial ownership is to be determined in the context of
particular cases with reference to the person or persons that enjoy the indicia
of beneficial ownership, which include the right to obtain the benefit of any
increase in value or dividends, the risk of loss of value, the right to vote the
stock or to determine who may vote the stock, the investment discretion
(including the power to dispose of the stock).
(43 Fed. Reg. 33,450, 33,458 (July 31, 1978).)
As general partners, (redacted)sess all of the indicia of beneficial ownership of the (redacted).
(Redacted) nonreported purchases of (redacted) shares and its stated intention not to file premerger notification in connection with the Tender Offer (Offer to Purchase, Section 15, at 29) raise serious questions under the H-S-R Act. Under the H-S-R Act (redacted)ad he acquired the (redacted) shares or made the Tender Offer directly, would not have been able to purchase more
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* Neither Schedule 13D nor 14D-1 filed (redacted) discloses the identity of the limited partners. Therefore (redacted) does not have sufficient (redacted) or (redacted) limited as well as a general partner. Other disclosure defects with respects (redacted) proposed acquisition (redacted) are detailed (redacted) Counterclaims and Answer (redacted).
* The FTC has previously applied the principle of beneficial ownership independent of the concept of control in challenging the use of the put-call arrangements. (FTC News, December 23, 1986, FTC Bureau Director Warns of Premerger Act Violations.)
than $15,000,000 of such shares without first giving notice and observing the applicable H-S-R Act waiting periods. Through the use of (redacted). However, (redacted)ut complying with the H-S-R Act has already obtained the right to vote and dispose of over $91,000,000 (redacted) securities and the right to share significantly in the increase in value of the (redacted) that will result from (redacted) exercise of the investment discretion he has regarding the shares.*
The Partnerships accumulation of this sizable block (redacted) voting securities provide (redacted) with a springboard to launch the Tender Offer, a decision that was exclusively his a general partner (redacted) (Partnership Agreement, Article IV, at 9-10.) Through the Tender Offer (redacted)s proposing to acquire all of the outstanding shares (redacted) without complying with the H-S-R Act. Some analysts believe that (redacted) claim was to elicit a higher bid, enabling him to make a big profit on the 9.99 percent he already owns. (Redacted). Otherwise, if the Tender Offer is successfully (redacted) unilaterally, will be in a position to accomplish a merger (redacted) and dispose of a substantial portion (redacted). (Offer to Purchase, Section 12, at 22-25).
Therefore (redacted) has already violated the H-S-R Act by acquiring beneficial ownership of more than $15,000,000 of (redacted)ting securities in nonexempt transactions (redacted) will continue to violate the H-S-R Act if he is permitted to acquire beneficial ownership of (redacted) shares through the unreported Tender Offer. In both of the above situation (redacted) acquisition of beneficial ownership (redacted) securities is in contravention of the H-S-R Act independent of whether he controls (redacted). (Rule Section 801.1(c).)
(Redacted) activities must also be considered under Rule Section 801.90 pursuant to which the FTC has authority to challenge transactions entered into for the purpose of avoiding obligations under the H-S-R Act. The recent amendments to the Rules concerning acquisitions made by partnerships state that a partnership used as an avoidance device will be disregarded when, for example, some persons might be tempted to make an acquisition through a partnership for the purpose of avoiding reporting or delaying their premerger notifications to the antitrust agencies until they were required by the federal securities laws to announce their acquisition publicly. (52 Fed. Reg. 20053, 20060 (May 29, 1987).)
In the instant case (redacted) appears to have (redacted)n the very way prohibited by the
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* Prior (redacted) filing of the Schedule 13D on October (redacted) were trading at $32.25 (redacted).
** On November 2 the Tender Offer was an-(redacted).
FTC. Through (redacted) was able to accumulate secretly the maximum amount (redacted) (i.e. 9.9%) before confronting the provisions of the federal securities laws and the New Jersey Shareholders Protection Act (NJSPA) that imposes conditions on the purchaser of 10% or more (redacted) shares without board of directors approval. (See Schedule 13D, Item 4, at 7-13 and Offer to Purchase, Section 12, at 22-24 for a further discussion of th(redacted).
In addition, there appears to have been no business purpose for using (redacted) to acquire (redacted) shares or make the Tender Offer a (redacted) would appear to have been in a position to have done either directly. For example (redacted) s personally involved in certain financing agreements associated with the Tender Offer. First, (redacted) are the sole general partners of a second partner (redacted). Pursuant to the terms of the Tender Offer, (redacted) has committed to provide $150,000,000 of the financing for the Tender Offer. (Offer to Purchase, Section 10, at 19-20) Combined with the equity investment made by (redacted) as the sole general partners of both partnerships are responsible for funding approximately 23% of the total purchase price necessary for acquiring all of (redacted) voting securities. Second (redacted) personally, and (redacted)ve entered into a commitment letter with National Westminster Bank USA (NatWest) pursuant to which NatWest has committed to lend $100,000,000 and obtain commitments for an additional $440,000,000 in financing for the Tender Offer (redacted) is personally obligated, along with (redacted) to fulfill the conditions of the commitment letter with NatWest. (Offer to Purchase, Section 10, at 13-16. (Redacted) so has entered into a letter agreement with (redacted) pursuant to which a fee was paid to NatWest in connection with the signing of the commitment letter and which provides for additional fees to be paid to NatWest (redacted) in connection with Tender Offer financing. (Offer to Purchase, Section 10, at 15.)
(Redacted) significant personal involvement in connection with the Tender Offer financing suggests that he, rather than his partnership, is the real party in interest with respect to the acquisition of (redacted) voting securities. As such (redacted) use of interrelated partnerships to accomplish the acquisition of (redacted) alls into question whether (redacted)tent was to avoid complying with the obligations of the H-S-R Act.
(Redacted) use (redacted) to acquire beneficial ownership of 9.9% (redacted) securities valued in excess of $91,000,000 and to make the Tender Offer for all o(redacted) shares valued in excess of $1 billion without reporting under the H-S-R Act cries out for FTC scrutiny. Thus (redacted) respectfully request that the FTC investigate these purchases and the proposed Tender Offer.
If you have any questions or require any further information, please feel free to call me.
(Redacted)
(Redacted)