Question
March 15, 2004
VIAFACSIMILE
Marian R. Bruno, Esq.
Assistant Director
Michael Verne, Esq.
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 303
Sixth-Street and Pennsylvania Ave., N.W.
Washington,C. 20509
Dear Marian and Mike:
Thank you for your assistance on March 10, 2004, with respect tothe reportability of the (redacted) transaction. Attached for the record is thetransaction summary I sent you on March 9. You advised based on this summarythat, while the first step is reportable by both (redacted) and (redacted) , thesecond step is exempt under Section 7a(c)10. This letter confirms that advice
(Redacted) /(redacted) WIRELESS ACQUISITION
Re: Points for FTC Premerger NotificationOffice Discussion
1. The Deal
a.(Redacted) is acquiring all of thevoting shares of (redacted). For taxi reasons, the transaction will tale placein two steps.
b.(Redacted) is a joint venture of (redacted)and (redacted). The assets and operations of the business are within (redacted),which is owned 60 percent by (redacted) and 40 percent by (redacted).
c.However, (redacted) is managed by (redacted),a management company" that does not hold significant assets. Thevoting securities of (redacted) are owned 50/50 by (redacted) and (redacted).
d.Prior to the acquisition of (redacted),the equity structure of (redacted) will be adjusted through the issuance ofnon-voting interests to give (redacted) a 60 percent equity interest (redacted)a 40 percent equity interest. While the voting stock will remain 50/50, the equityinterests in (redacted) and (redacted) will be identical at that time.
e.At closing, a wholly-owned subsidiaryof (redacted) will merge with (redacted), with (redacted) as the survivingentity. For tax reasons, (redacted) will hold (redacted) for a period of timewhile corporate entities are converted to LLCs.
f.Thereafter, (redacted) will be"dropped down" from (redacted) to (redacted). This step involves (redacted)contributing the (redacted) entities to (redacted) and in return the LLCissuing new LLC units to (redacted). (Staff comment per call -%ownership interests do not change)
g.As noted, that will not affect theequity interests at 60/40.
2. Issues as to Step 1. (See originalimage for various comments by staff)
a.Obviously, (redacted) is acquiring 60% interestin (redacted) and must file.
b.(redacted) technically may beconsidered a second ultimate parent entity under 16 C.F.R. 801.1(b)(2)because it owns 50% of (redacted) voting stock.
c.If the transaction were structured sothat (redacted) made the acquisition directly, (redacted) would be the onlyfiling.
d.Since that is the end result, and theequity is always, 60%/40%, we propose the FTC staff ignore the interim step andtreat this as one transaction with only (redacted) as the acquiring company.
3. Issues as to Step 2.
a.The "drop down" will notchange any substantive ownership or control.
b.Again, theequity positions of (redacted) (60 percent) and (redacted) (40 percent) do notchange in the second step of the transaction, nor will the 50/50 management.
c.The second step, while not literally an"intraperson transaction" under 16 C.F.R. 802.30 because theacquiring and acquired persons are not the same person by reason of holdingsof voting securities, is analogous to that exemption in an LLC context.
d.Moreover, if the second step were theacquisition of voting securities instead of LLC interests, it would be exemptunder 16 U.S.C. 18a(c)(3) (the acquisition of voting securities bya holder of 50 percent or more of the voting securities).
e.Thus, we propose the FTC staff nottreat the second step as a second reportable event,
(Refer to original document forDiagram).