Question
(redacted)
June 7, 1999
Richard B. Smith
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Dear Mr. Smith:
This is to confirm that the following transaction, which we discussed about May 20, 1999, is not reportable. The assets of four separate companies, each of which companies is presently owned 50/50 by two adult brothers, will be placed in a newly created limited liability company (LLC), resulting in four LLCs. Then the membership interests of the four LLCs will be contributed to a newly-created holding company LLC, which will be owned 50/50 by the two brothers. Thereafter, a third party will purchase 51% of the membership interest in the LLC from the brothers. The result will be that the third party will own 51% of the LLC and the brothers will jointly own 49% of the LLC.
The creation of the four LLCs and the LLC holding company is exempt from making a Hart-Scott-Rodino filing because a filing is required only if two or more pre=existing, separately-controlled businesses will be contributed to the LLC. Forma Interpretation Number 15, 64-Fed. Reg. 5805, 5809 (Feb. 5, 1999). Here, the businesses will be controlled by the same parties before and after the creation of the LLCs.
The acquisition of the 51% interest in the holding company by ta third party is not reportable, although the size-of-parties and size-of-transaction tests are met. This is because Formal Interpretation Number 15 provides that the acquisition of an interest in an LLC is not reportable unless (1) a business is contributed to the LLC as consideration, or (2) 100% of the LLC is acquired. Id In our situation, cash is the consideration, and less than 100% interest is being acquired. Therefore, no filing is required.
Please advise me within three (3) days of your receipt of this letter if you disagree with the above.
Thank you very much.
Sincerely,
(redacted)
(redacted)