Question
(redacted)
April 2, 1998
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re: Premerger Notification Under Section 7A of the Clayton Act-Interpretation of "Size of Person" Test
Dear Mr. Smith:
This firm is counsel to an acquiring person pursuing the acquisition of all of the issued and outstanding capital stock of an acquired person. We are currently analyzing whether premerger notification is required under Section 7A of the Clayton Act. The acquiring person has total assets in excess of $100 million.
In our telephone conversation, I posed the question whether assets reflected on the balance sheet of the acquired person but held temporarily in a fiduciary capacity may be excluded for purposes of the "size of person" test. Specifically, the acquired person in this instance is an insurance agency which bills its customers for insurance premiums and temporarily holds payments before aggregating and transmitting payments to insurers. The balance sheet of the acquiree lists premium payments from customers as "cash - restricted", or "investments - restricted", and the acquired person books accounts receivable for premiums to be received from insured for subsequent payment to insurers as "accounts receivable- premiums."
According to regulations promulgated by the FTC, total assets are determined from the last regularly prepared balance sheet 16 C.F.R 801.11(c). But where the balance sheet entries identify these assets as restricted or otherwise held in a fiduciary capacity, you contemplated that these items may be properly excluded from the acquired person's balance sheet for the "size of person" test.
At your suggestion, I have enclosed a copy of the acquired person's balance sheet as at December 31, 1997 with the name of the company redacted.. Kindly confirm to us in writing that such "trust fund" assets may be excluded from the acquired person's balance sheet for the "size of person" test.
I will be out of the office the week of Aril 6th and returning April 13, 1998. Should you have any questions, please feel free to call me or if it is during my absence, please call my partner, (redacted). Thank you for your prompt attention to this matter.
Very truly yours,
cc: (redacted)
[One page of "Consolidated Balance Sheets" is attached. see PDF]