Question
(redacted)
July 11, 1996
VIA FACSIMILE
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re: Application of Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the Act)
Dear Dick:
The purpose of this letter is ask you on behalf of the Premerger Notification Office, to review the terms of a proposed transaction, which will be structured as described in this letter and the accompanying attachment, so that we may discuss the application of the Act to the proposed transaction.
The proposed transaction is among six entities, four of which (redacted) A, B, C, and D) are not-for-profit corporations and two of which (redacted) E and F are political subdivisions of a State whose charters were enacted by the State legislature (redacted) is a non-stock corporation whose members are individuals and is its own ultimate parent entity (redacted) is a non-stock corporation which does not have any members. The board of directors (redacted) are elected by (redacted) B an (redacted) B is therefore the ultimate parent entity of (redacted) B. (Redacted) B has other business activities outside of its interest in (redacted) B. (Redacted), a non-stock corporation and its own ultimate parent entity, has as its member the members of its governing board (redacted) is also a non-stock corporation and its own ultimate parent entity. The members of (redacted) are individuals. Each of the four not-for-profit entities will satisfy the $100,000,000 size of person test under 15 U.S.C. Section 18a(a)(2). (Redacted) E and F, the two political subdivisions, are controlled (through the right to elect the board) by another political subdivision and should not be considered persons under the definition contained in 16 C.F.R. Section 801.1(a).
The six entities propose to form a not-for-profit corporate joint venture, Newco, which will be a non-stock, non-member corporation. Prior to the formation of Newco (redacted) A, B, C and D will amend their charters to add a member, which will have the power to control the (redacted) through certain reserve powers and through the right to approve the election of a majority of the board of directors of (redacted) At the time of the formation of Newco, each of (redacted) A, B, C and D will contribute the controlling membership to Newco in exchange for the right to appoint a director of Newco. Thus, Newco will become the controlling member of each of (redacted) A, B, C and D and each of (redacted) A, B, C and D will receive the right to appoint a member of Newcos board.
Prior to the formation of Newco, each of (redacted) E and F (the political subdivisions) will form a non-stock, not-for-profit corporation (Corporations E-1 and F-1), whose members will be (redacted) E and F, respectively. Because (redacted) E and F are political subdivisions, each of Corporations E-1 and F-1 will be its own ultimate parent entity. Moreover, even though Corporations E-1 and F-1 will be persons under the Act, they will have minimal assets upon formation and will not satisfy the size of person test under 15 U.S.C. Section18a(a)(2). Like each of the other (redacted) each of (redacted) and F will receive the right to appoint a director of Newco at the time of Newcos formation. Newco will become the controlling member of Corporation E-1 and F-1 at the time of Newcos formation. In addition, Corporations E-1 and F-1 will enter into management agreements (redacted) and F, respectively, pursuant to which they will manage (redacted) E and F.
Each of (redacted) B, C and D, E and F will have the right to elect a director to the Newco board of directors and, in addition, there will be two community representatives on the Newco board.
The structure prior to the formation of Newco and after the formation of Newco is depicted on the diagram attached to this letter.
I 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 non-stock, not-for-profit joint venture corporation which does not require premerger notification under the Act. I would like to speak with you as soon as possible to discuss the Premerger Notification Offices position with respect to this proposed transaction. Please telephone me (redacted) your earliest convenience.
Very truly yours,
(Redacted)
cc: (redacted)