Question
(redacted)
February 5, 1991
Ms. Nancy M. Ovuka
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Dear Ms. Ovuka :
This letter is to follow up on our earlier discussion concerning the necessity for filing a premerger notification in connection with the proposed transaction described below.
As I explained to you, the proposed transaction is in general form a purchase/lease transaction in which the purchaser/lessor is a real estate investment trust (herein, the (redacted) which is in the business of providing purchase/lease or mortgage financing for certain operating businesses. The (redacted) intends to be and to remain qualified as a real estate investment trust under the Internal Revenue Code. As you are aware, continued qualification under the Internal Revenue Code as a real estate investment trust imposes certain limitations on the sources of the (redacted) income. In particular, the (redacted) is limited in its ability to operate any of the businesses of which it has purchases the assets. In order to be sure of satisfying the income limitations, the (redacted) does not operate any of the businesses for which it has provided financing, except on a temporary basis following the default under a mortgage or lease, and then only for a limited period of time.
The (redacted) proposes to enter into a purchase/lease transaction in which it will acquire several businesses now operated by a corporation controlled by Mr. A. The businesses will be acquired by merging Mr. As corporation into the (redacted). The businesses will then be leased to a limited partnership which is associated with Mr. A, but not controlled by him within the meaning of te premerger regulations.
If I correctly understand the thrust of our discussion, based on the limitations which the Internal Revenue Code imposes on the (redacted) activities, the acquisition of the businesses by merger with Mr. As subsidiary and their lease to the limited partnership would be considered to be within the ordinary course of the (redacted) business and, thus, exempt from premerger notification pursuant to 15 USC 18(c)(1).
After you have had an opportunity to review this matter, please call me at (redacted) with any questions or to further discuss the necessity for premerger notification in connection with the proposed transaction described in this letter.
Very truly yours,
cc: (redacted)