Question
Via OvernightDelivery
August 9, 2004
Ms. Nancy Ovuka
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6"' and Pennsylvania Ave., N.W.
Washington, DC 20580
Dear Nancy:
This lettersummarizes our telephone conversation of July 22, 2004 in which (redacted) alsoparticipated. The purpose of this call was to confirm with you our analysis ofwhy a proposed acquisition by my client ("Buyer") of assetscontrolled by (redacted) client ("Seller") would not trigger thereporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act, 15U.S.C. 18a , as amended ("HSR Act").
As we explained,Buyer is a U.S. entity and Seller is a non-U.S. entity. Buyer is acquiring aline of business, the manufacturing assets of which are located outside of theU.S. Buyer is paying more than $500 million, and will allocate the bulk of theacquisition price to the purchase of these foreign assets. The products sold inthis line of business ("Products") are sold through Seller's variousworldwide sales subsidiaries. Buyer will acquire the portion of the assets ofeach of these sales subsidiaries that Seller uses to sell Products. That willinclude some of the assets of S l, consisting primarily of office equipment. S1is the only U.S. subsidiary of Seller that sells Products. Buyer will allocatea de minimis amount of the acquisition price, well below $1 million, to the acquisitionof the S 1 assets.
According toSeller, all other Seller entities besides S1 collectively generated less than$15,000 of Product sales in or into the U.S. Furthermore, according to Seller,S1 booked about $55 million in Product sales during its most recent fiscalyear. Of this amount, S1 shipped about $37 million in Product sales to U.S.customers, and about $18 million to non-U.S. customers. Moreover, only about$19.5 million of the sales booked by S1 were shipped into the U.S. according toSeller. The rest of S1's Product sales, valued at about $35.5 million, wereshipped from their place of manufacture outside of the U.S. to locations alsooutside of the U.S. as designated by S1's U.S. and non-U.S. customers ("S1Non-U.S. Products").
According toSeller, S1 Non-U.S. Products were never shipped into the U.S. Title to S1Non-U.S. Products passed outside of the U.S. The risk of loss relating to S1Non-U.S. Products passed from Seller to its U.S. and non-U.S. customers outsideof the U.S. Moreover, S1 Non-U. S. Products were not designed for specific usein the U.S.
Based upon thesefacts, you confirmed that the parties to this transaction would not be requiredto file a Notification and Report Form pursuant to the HSR Act because thisacquisition does not pass the size of transaction test. This is because theamount of the purchase price allocated to the purchase of US assets is wellbelow $50 million, and the parties are entitled to exclude the portion of thepurchase price allocated to the purchase of the non-U.S. assets. Although S1booked $55 million in sales during its most recent fiscal year, Seller'sforeign assets did not generate sales in or into the U.S. exceeding $50million. This is because Products representing about $35.5 million of S1's $55million in sales were never shipped into the US, and the indicia of beneficialownership to the Products passed outside of the U.S.
I wouldappreciate your calling me at your earliest convenience to confirm that theanalysis described herein is accurate. Thank you for your assistance.