Question
January 23, 1991
(redacted)
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re:Compliance with the Hart-Scott Rodino Act (the Act)
Dear Mr. Smith:
This letter will confirm our telephone conversation of January 23, 1991. As we discussed, this firm represents a company (Acquiring Person) with assets or annual net sales exceeding One Hundred Million Dollars ($100,000.000. The Acquiring Person has entered into an agreement to purchase one hundred percent (100%) of the voting securities of four companies (individually, each is an Acquired Person, collectively, the Acquired Persons) which are not engaged in manufacturing. The total purchase price of Eleven Million Three Hundred Thousand Dollars ($11,300,000) is allocated amongst the four Acquired Persons in the following amounts: $3, 300,000 to two of the companies collectively, $200,000 to one of the companies; and of the companies and $7,800,000 to the last of the companies. In addition to this purchase price, the selling shareholders will received, over a period of ten years, approximately $5,030,000 collectively in consideration of their entry into separate employment agreements which contain individual covenant not to compete. Pursuant to the Act, it would appear that the proposed transaction is not exempt from filing requirements.
However, you advised that 16 CFR 802.20 (the Regulation) overrides the Act. Subsection (b) of the Regulation sets forth the test to be applied in the proposed transaction because the Acquiring Person is acquiring one hundred percent (100%) of the voting securities of each Acquired Person. Filing is required only if any Acquired Person has either annual net sales or total assets exceeding - not equal to Twenty-Five Million Dollars ($25,000,000). You advised that the test is applied to each Acquired Person individually and annual net sales or total assets are not aggregated amongst the Acquired Persons to determine whether filing is required. If any one Acquired Persons annual net sales or total assets exceed Twenty-Five Million Dollars $25,000,000); filing is required for Acquired Person only.
We have determined that none of the four (4) Acquired Persons have annual net sales or total assets exceeding TwentyFive Million Dollars ($25,000,000' and therefore, under Subsection (b) of the Regulation, the proposed transaction is exempt from filing.
Please confirm that, based on the facts described herein, the proposed transaction is exempt from filing. We would appreciate your prompt attention to this matter as we anticipate our closing to occur February 1991.
Thank you for your cooperation and assistance.
Very truly yours
cc: (redacted)