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Date
Rule
801.11
Staff
Bernard Rubenstein
File Number
9906014
Response/Comments
If the assets for the company are less than $10 million, then a pro-forma must be created. We don’t take personal financial statements prepared for loans. A pro-forma must be created for the FTC which includes all assets, as was correctly defined above. In calculating assets, the purchase price of those assets can be used. If a million shares of Microsoft Corp. were bought ten years ago, the original purchase price can be used if there are no regularly prepared financial statements with the current market value of those shares on it. Note #1 - Per our conversation, the financial statement was prepared for a loan. We need a separate pro-forma for all other assets besides the corporation if the corporation has less than $10 million in assets on its balance sheet. Note#2 - Asset entry is below $10 million. Note# 3 - Assets are according to regularly prepared balance sheet. The entire assets of a company that a person has more than 50% interest are attributed to that person.

Question

(redacted)

VIA FACSIMILE

Mr. Bernard Rubenstein
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Sixth and Pennsylvania Avenue, N.W.
Room 303
Washington, D.C. 20580

Re: Size of Person Test

Dear Mr. Rubenstein:

 

This letter is to confirm our telephone conversation of today, in which you and I discussed the application of the “Size of Person Test” to an individual (“Seller”) who owns one hundred percent of a business (“Company”) to be purchase by a corporation (“Buyer”). It is my understanding, based on the facts set forth below, that the acquisition of Company would not be a reportable transaction under the Hart-Scott-Rodino-Antitrust Improvements Act of 1976, as amended (the”Act”) 15 U.S.C. § 18a and the rules promulgated thereunder (“HSR Rules”)

 

            As I mentioned, one should assume that the “Size of Transaction Test” would be satisfied by Buyer’s purchase of Company, and that Buyer has in excess of $100 million in sales for the most recent year.

 

            Seller is a natural person who owns, in addition to the voting securities of Company, other classes of assets, as described in HSR Rule 16 C.F.R. §801.11. Seller is not a “manufacturer” within the meaning of the HSR Rules. Seller has a personal financial statement (Note #1) prepared as of June 30, 1998, that includes an asset entry for the value (Note #2) of Seller’s ownership interest in Company. The asset value is based on the fair market value, not on the value of the assets as reflected on Company’s most recent, regularly prepared balance sheet, which is dated December 31, 1998.

 

            In order to determine whether Seller has at least ten million in total assets, Seller must consider the value of its investment assets, voting securities and other income-producing property, as well as the total assets of all the entities Seller “controls” within the meaning of the HSR Rules. Based on the facts set forth above, it is my understanding that the staff of the Federal Trade Commission’s Premerger Notification Office is of the view that in making this determination, Seller should include the total assets of Company as reflected in Company’s most recent regularly-prepared balance sheet, and not include the value of Company that is based on Company’s fair market value, which appear’s on Seller’s June 30 financial statement. If, based on this analysis, Seller has less than10 million dollars in total assets, and less than 100 million in annual net sales, the acquisition by Buyer of Company will not be reportable.

 

            As we discussed, I am enclosing a copy of a letter sent on August 25, 1997, to Richard B. Smith of your office that appears to outline analogous facts. The marginalia indicate that Mr. Smith concurred with the conclusion that the transaction at issue was not reportable.

 

            Should you have any questions, or if my understanding is not correct, please contact me at your earliest opportunity.

 

            I appreciate very much the guidance you have provided in this matter.

 

(redacted)

 

cc: (redacted)

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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