Question
(redacted)
July 31, 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.
For the purpose of this letter, we will assume that the jurisdictional tests of the Act are met by the parties and the proposed transaction. The proposed transaction is the formation of a new, non-stock, not-for-profit corporation by two entities, Joint Venture A and Holding Company B. Joint Venture A is an unincorporated joint venture between Health System A-1 and Health System A-2. As part of the joint venture, Health System A-1 is the sole common stockholder of Hospital A, a stock, not-for-profit corporation, and Health System B-1 is the sole holder of convertible debentures issued by Hospital A. In their capacities as stockholder an debenture holder, Health System A-1 and Health System A-2, have equal control over Hospital A and are each ultimate parent entities of Hospital A. Health System A-1 and Health System A-2 each have substantial activities outside of Joint Venture A.
Holding Company B is a non-stock, not-for-profit corporation, which has as its corporate members certain osteopathic physicians practicing medicine at Hospital B, and is its own ultimate parent entity. Holding Company Bs sole purpose is to hold the corporate membership of Hospital B, a non-stock, not-for-profit corporations associated with Hospital B (the Related Companies). Holding B has no has no other significant business activities outside of its interests in Hospital B and the Related Companies.
Joint Venture A and Holding Company B propose to form a not-for-profit corporate joint venture, Newco, which will be a non-stock corporation. At the time of formation, Joint Venture A will contribute to Newco the stock and debenture of Hospital A and Holding Company B will contribute to Newco the corporate membership in Hospital B. Holding Company B will also contribute to Newco the voting securities and corporate memberships of the Related Companies. At the present, it has not been decided how Health System A-1 and Health System A-2 will hold Joint Venture As membership in Newco. As members of Newco, Joint Venture A (or Health System A-2, collectively) and Holding Company B will have the right to elect an equal number of directors to the Newco board of directors.
The structure prior to the formation of Newco and after the formation of Newco is depicted on the diagram attached to this letter.
On the basis of our previous conversations regarding the formation of non-stock, not-for-profit corporation, I believe that the Premerger Notification Office may 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) at your earliest convenience.
Very truly yours,
(Redacted)
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cc: (redacted)