Question
(redacted)
January 2, 1991
Richard B. Smith, Esquire
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580
Dear Dick:
This letter serves to confirm our telephone conversation of Tuesday, December 4, 1990. During that conversation, you agreed that based on the facts I provided, the transaction described below as not reported. The facts we discussed are as follows:
Companies A & B, which control respectively, Partnerships C (a partnership to be formed) and D, are to exchange partnership interests in their partnerships. Company A will acquire a 1% interest in Partnership D from Partnership D, which is controlled by Company B, for the payment of $5 million cash. Company A will also receive a $10 million note from Partnership D which is convertible into a 9% interest in Partnership D. The consideration for the $10 million convertible note is Company As transfer to Partnership D of a 30% interest in Partnership C which Company A controls.
Partnership Ds acquisition of the 30% interest in Partnership C will be accomplished as follows.
Company A will transfer a 30% interest in the intangible assets of one of its business units (the unit) into a subsidiary which will transfer the assets to Partnership D. Company A and Partnership D will ten contribute their 70% and 30% interests in the unit assets to newly formed Partnership C in exchange for 70% and 30% interests in Partnership C.
Partnership D will be contractually committed to contribute the 30% interest in the assets which it receives from Company A and its subsidiary to the formation of Partnership C. The transfer of the assets to Partnership D and their subsequent contribution to the formation of Partnership C will likely occur on the same day, and in any event, will occur within a short period of time.
Given the facts set out above, it is my understanding that the Federal Trade Commissions Premerger Notification Office does not view the transfer of the 30% interest in the assets of the unit to Partnership D as reportable given that this is just an intermediate step in the partnership formation and exchange. I understand your caution that if Partnership D does not fulfill its contractual commitment to contribute the assets to Partnership C that a reportable transaction could occur without having been reported. I understand that ths would potentially subject each of the companies and partnerships to the penalties provided under the Hart-Scott-Rodino Notification Report Act of 1976 15 U.S.C. 18a (the Act), and I have so advised the parties.
If this letter does not currently reflect our conversation or mischaracterizes the view of the Premerger Notification Office, please contact me immediately. Unless I hear to the contrary by January 4, 1991, I will advise my client to rely on your advice that no reporting obligation arises.
Very truly yours,
cc: (redacted)