Question
VIA FACSIMILE
February 3, 1995
Mr. John Sipple
Premerger Notification Office
Federal Trade Commission
Washington, D.C.
Re: Application of Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Act")
Dear John:
The purpose of this letter is to outline and supplement the fact scenario that you, I and (redacted) talked about yesterday morning.
The proposed transaction is among three parties who satisfy the size of person test, Religious Entity A, Hospital System B and Hospital Foundation C. Religious Entity A, Hospital System B and Hospital Foundation C are all not-for-profit corporations. They propose to form a non-for-profit corporate joint venture, Newco . In the formation of Newco, Religious Entity A will contribute the corporate membership of Holding Company A to Newco in exchange for a corporate membership in Newco and an equalization payment from Newco, Hospital System B will contribute the corporate membership of Hospital B and cash to Newco in exchange for a corporate membership in Newco, and Hospital Foundation C will contribute the corporate membership of Hospital C to Newco in exchange for a corporate membership in Newco and an equalization payment from Newco. Religious Entity A, Hospital System B and Hospital Foundation C will have the right to elect 4 directors, 13 directors, and 8 directors, respectively, to the Newco board of directors. The pre-joint venture structure and the structure upon formation are depicted on the two diagrams attached to this letter.
During the course of our conversation, you asked us to detail for you the nature and extent of the operations of each of the three joint venturers outside of the joint venture. Religious Entity A will conduct religious and educational operations outside of the joint venture. In particular, Religious Entity A, in addition to its charitable and service work, will continue to own and operate an elementary school, a high school, a long-term care facility for aged members of the religious community and a retreat center. Hospital System B will continue to own and operate seven acute care hospitals, each of which has other related health care operations, and a long-term care company. Hospital Foundation C will continue after the joint venture. It will own and operate a total of six residential and office buildings. It also will operate as a public charity with assets in excess of $60 million outside of the joint venture, which it will use to support the advancement of osteopathic medicine and osteopathic education, Newco and potentially other health care related activities.
(Redacted) and I appreciate you taking the time to confer with us yesterday. We believe that, on the basis of the facts presented in this letter, the Premerger Notification Office should view this proposed transaction as the formation of a not-for-profit joint venture corporation which does not require premerger notification under the Act and not as a merger or consolidation requiring premerger notification. We would like to speak with you again as soon as possible to confirm the advice being rendered by the Premerger Notification Office. Please telephone me at (redacted) at your earliest convenience.
Very truly yours, (Redacted)
cc: (redacted)
[2 pages of diagrams see PDF]