Question
December 23, 2004
Michael B. Verne, Esq.
Federal Trade Commission
Premerger Notification Office
Bureau of Competition
Room 303
600 Pennsylvania Avenue, N. W.,
Washington, D.C. 20580
Dear Mr. Verne:
Iam writing to confirm our telephone conversation of Monday regarding theinapplicability of the premerger notification provisions of theHart-Scott-Rodino Antitrust Improvements Act to a proposed transaction whichmay have two stages.
Werepresent a foreign bank which, through an indirect wholly-owned Delaware limited liability company, will contribute $1 billion inexchange for certain preferred limited liability partnership interests in anewly formed Delaware limited liability partnership. Anotherforeign bank will, through an indirect wholly-owned Delaware limited liability company, contribute $4.6 billion inexchange for certain common limited liability partnership interests of thenewly formed LLP. The LLP's business will be to acquire, manage, and dispose ofso-called Permitted Assets which will include debt securities, cash, governmentbonds, certificates of deposit, and swaps.
Ourclient and the other foreign bank, through their respective subsidiaries, willbe the only partners with economic interests in the newly formed LLP. Thepreferred LLP interests to be purchased by our client will representapproximately 18% of the initial investment in the LLP and the common LLPinterests will represent approximately 82%. As we discussed, because our client,in the initial stage of the proposed transaction, will be purchasing and owningless than 100% of the newly formed LLP partnership interests, it will have nopremerger filing notification obligation in connection with this stage of thetransaction.
Pursuantto a call option agreement to be entered into between our client and the otherforeign bank investor, our client will have an option to purchase, or cause anaffiliate to purchase, the common LLP interests at a price equal to the fairmarket value of the common LLP interests. Assuming it were to exercise thisoption, our client would then own 100% of the partnership interests of the LLP.Nevertheless, we understand that this stage of the proposed transaction, wereit to occur and be subject to the premerger act and regulations as currentlywritten and interpreted, also would not require a premerger notification filingdue to the financial nature of the Permitted Assets to be owned by the LLP.
Ifyou have any questions about the foregoing, please feel free to contact me atthe above telephone number. I thank you for your time and attention to thismatter.