Question
(redacted)
April 23, 1991
Victor Cohen
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580
Dear Mr. Cohen:
This letter serves to confirm our telephone conversation of April 22. 1991. During that conversation, you, (redacted) and I discussed the potential reportability under Section 7A of the Clayton Act (the Act) of two proposed corporate transactions. With respect tot he first proposed transaction, we discussed the following facts:
In 1986, nonprofit corporation A and nonprofit corporation B decided to combine their operations. The manner in which they proposed to do so was by establishing a for-profit management company, C, the voting securities of which would be owned equally by A and b. The directors of C were to be the voting members of A and B, with the authority to elect the directors of A and B.
In early 1987, C was incorporated and the combination of A and B was effected. To satisfy state regulatory concerns, the mechanism of the consolidation was altered slightly. While each of A and B owns 50% of Cs voting securities, Cs control over A and B is effected through common directors. The bylaws of A and B provide that all directors of C, plus Cs chief executive officer, must hold seats on the respective boards of A and B. Cs representatives were installed on the boards of A and B in 1987, and they have constitutes a majority since then. The boards of A and B are self-perpetuating.
To simplify the corporate structure, C now wishes to effect a statutory merger of B into A.
No - under 801.1(c)(8)
Based upon the foregoing facts and our discussion with you about them, it is my understanding that the Premerger Office does not consider the proposed merger of B into A to be a reportable transaction. The premise of the 1986 filing was that the combination of A and B through the medium of C was tantamount to a consolidation and therefore to an acquisition of voting securities. Accordingly, the statutory merger of B into A would fall within the intra person exemption of 16 C.F.R. 802.30.
The facts we discussed concerning the second proposed transaction are the following:
In late 1987, C acquired of nonprofit corporation D by gaining the right to choose the members of D who elect Ds directors. Cs board of directors exercised this right by appointing themselves as the members of D and in their capacity as the members of D, they then elected themselves as the directors of D.
Although this transaction appears to have been tantamount to an acquisition of voting securities,] it was not reported under the Act, because it did not meet the size-of-transaction test set out in 7A(a)(3) of the Act, as qualified by 16 C.F.R. 802.20.
The old 1987 view
C now wishes to effect the merger of D into A.
Not hold v/s under 1991 views
Based upon the foregoing facts and our discussion with you, it is my understanding that the Premerger Office does not consider the merger of D into A to be a reportable transaction. Cs present position with respect to both A and D is equivalent to the ownership of their respective voting securities. As a consequence, the merger of D into A would constitute an intra person transaction under 16 C.F.R. 802.30.
If this letter does not correctly reflect our conversation or mischaracterizes the views of the Premerger Office, please contact me as soon as possible Unless I hear from you to the contrary, I will continue to advise C and its affiliates in accordance with the analysis set forth above. Thank you for your consideration.
Sincerely yours,
(redacted)
(redacted)