Question
September 16, 2004
BY FEDERAL EXPRESS AND E-MAIL
Mr. Michael Verne, Esq.
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 303, 6th Street and
Pennsylvania Ave. N.W.
Washington, DC 20580
Re: Hart-Scott-Rodino Compliance Inquiry
Dear Mr. Verne:
This letter summarizes our telephone conversation today regarding my inquiryconcerning the correct interpretation of the Hart-Scott-Rodino Antitrust ImprovementsAct of 1976, as amended, 15 U.S.C. 18a (the "HSR Act"), and the rules promulgatedthereunder, 16 C.F.R. 801.1 et seq. (the "Rules"). Forthe sake of clarity, it also states additional facts in some instances.Finally, it also states a few further assumptions that I have made based on theadvice that you provided to me.
A. Transaction Summary.
An acquiring person contemplates simultaneously executing separate agreementsfor the purchase of assets from an acquired person. These transactions willclose at separate times, and the closing of the first transaction is aprecondition of the closing of the second transaction. The parties to thetransaction meet the Size-of-Persons test under the HSR Act; the transactions contemplated bythe agreements collectively will meet the Size-of-Transaction test under the HSR Act; and the use of two agreements andtwo closings is not an artifice to avoid a filing under the HSR Act in violation of Section 801.90 ofthe Rules.
B.My Question.
Section 801.13(b)(2) of the Rules establishes the aggregation rules for assetacquisitions:
(i) If the acquiring person has signed a letter of intent orenters into a contract or agreement in principle to acquire assets from theacquired person, and
(ii) Subject to the provisions of 801.15, if the acquiringperson has acquired from the acquired person within 180 calendar days precedingthe signing of such agreement any assets which are presently held by theacquiring person, and the acquisition of which was not previously subject tothe requirements of the act or the acquisition of which was subject to therequirements of the act but they were not observed, then for purposes of thesize-of-transaction tests of Section 7A(a)(2) and for 801.1(h), both theacquiring and the acquired persons shall treat such assets as though they hadnot previously been acquired and are being acquired as part of the presentacquisition.
However, thisaggregation requirement does not apply in instances where two agreements areexecuted simultaneously because, in order for aggregation to be required, thetransactions contemplated by the first agreement must be closed before thesecond agreement is signed. Accordingly, Interpretation 154 of the ABAPremerger Notification Practice Manual (3rd Ed. 2003) notes, "[I]f asecond agreement for the acquisition of assets is entered into prior to theclosing of a previous asset acquisition, as long as the two agreements areseparate..., no aggregation would be required for the second assetacquisition."
However, I also reviewed Informal Staff Opinion 0312008, which was a letteraddressed to you. In the advice reflected in that letter, you appeared toadvise that the aggregation of the acquisition prices for two separate assetacquisitions by an acquiring person from an acquired person was required,although the asset purchase agreements were executed simultaneously. Thisadvice appeared to me to contradict Interpretation 154. I called you and askedyou to explain the apparent contradiction.
C. Your Advice.
You advised me that separate agreements between an acquiring person and anacquired person are treated as a single agreement for purposes of the HSR Act if the closing of the transactionscontemplated by the second agreement are contingent upon the closing of thetransactions contemplated by the first agreement. You also advised me that theparties in Informal Staff Opinion 0312008 were advised that they could closethe transactions contemplated by the first acquisition before the terminationor expiration of any waiting period under the HSR Act because that acquisition standingalone did not meet the size-of-transaction test.
Based on this advice, it appears that the agreements described in Section Aabove would be deemed to be a single agreement for purposes of the HSR Act and that the considerations adducedin Interpretation 154 accordingly are not implicated in this instance. However,it also appears that the parties may close the transactions contemplated by thefirst
agreement priorto the expiration or termination of the waiting period under the HSR Act as long as the acquisition price ofthe assets in the first agreement is $50 million or less.
D. FurtherAssumptions.
I assume and desire to confirm that item 3(a) of the HSR Notification and Report Form to be filedfor both agreements should describe both of the agreements and theinterrelationship pursuant to which they are deemed to be a single agreement. Ifurther assume and desire to confirm that item 3(b)(i) of such HSR Notification and Report Form shoulddescribe the assets being acquired under both of the agreements.
I understand that the Premerger Notification Office does not confirm informaladvice in writing. However, I would appreciate it if you would call me at(redacted) when you have the chance to confirm whether or not this lettercorrectly represents our discussion and the advice that you gave to me. I alsowould appreciate it if you could confirm whether or not my further assumptionsare accurate and, to the extent that they may be inaccurate, explain how theyare inaccurate. Thank you for your prompt assistance regarding this inquiry.