Question
December 2, 1992
BY HAND
Patrick Sharpe, Esq.
Premerger Notification Office
Bureau of Competition
Room 321
Federal Trade Commission
6th and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Re: Request for Informal Opinion on H-S-R
Reportability of Acquisition Scenario
Dear Patrick:
As we discussed by telephone today, set forth below is an acquisition scenario for which I would appreciate your opinion as to whether a similar transaction would be reportable under the H-S-R Rules and Regulations.
Company A intends to acquire certain retail leases, fixed assets and inventory from a debtor in possession (Company B). In addition, Company A will agree to guarantee a $500,000 line of credit for Company B, but it is not anticipated that Company A will be called on to pay any portion of the funds guaranteed. Including the guarantee, the acquisition price is expected to be approximately $13.7 million. As part of the agreement between Company A and Company B, a cap will be placed on how much inventory will be transferred at each retail location at the time of closing. Company A would rather not take any inventory, but as a condition of the sale Company B insisted that Company A commit to take a certain amount of inventory up to the established cap. If the inventory exceeds the cap at any location Company B will either retain or sell the inventory or Company A will agree to sell the Inventory for the benefit of Company B. From Company Bs perspective, a reason for placing the cap on inventory to be
transferred is a desire to keep the acquisition price below $15 million so that H-S-R filings will not be necessary. The reason why Company B does not want the acquisition price to exceed the $15 million filling threshold is because, for timing reasons, compliance with the H-S-R waiting period would make the transaction impractical. As stated previously, Company A would rather not take any inventory.
It is our believe (sic) that this potential acquisition is not competitively significant and the acquisition structure and purchase price are unrelated to any competition issues.
Under this fact scenario, where the acquisition price and the fair market value of the assets to be acquired is less than $15 million, is there any reason why this acquisition should be reported?
Sincerely,
[redacted]