Question
December 23, 2004
VIA FACSIMILE
B. Michael Verne, Esq.
Premerger NotificationOffice
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave, NW
Washington, D.C. 20580
Re: Confirmation of Advice Regarding HSR Reportability
Dear Mr. Verne:
Thankyou for taking the time to speak with me earlier this week about the potential HSR reporting obligations that may arise in the followingcircumstances. Buyer is considering an acquisition. Initially it appeared thatthere were two acquisitions, because one of the target businesses is owned byone individual, and the other is owned by a separate ownership group. Onfurther analysis, however, it appears that acquisition of this second businessactually constitutes two acquisitions- Some time ago, and for legitimatebusiness reasons entirely unrelated to this proposed acquisition, the businesswas organized into two different legal entities:
1. Entity 1 ("Corporation") isa privately held corporation. The voting securities of Corporation are held byindividuals, and although there is a buy-sell agreement, no one has the rightto vote anyone else's shares. No individual (or combination of husband, wife,and minor children) owns 50% of the voting securities or has the right toappoint 50% of the directors.
2. Entity 2 ("LLC") is an LLC.The same individuals hold essentially the same percentage interests in LLC as they do in Corporation.Consequently no-one has the right to 50% of the profits of LLC or to 50% of theassets of LLC on dissolution.
Corporation and LLC are in the same line of business, and theirfinancial results are reported to the shareholder and members in a consolidatedfinancial statement.
Buyerwill acquire 100% of the voting securities of the corporation (or substantiallyall of its assets) and 100% of either the ownership interests or the assets ofthe LLC. Depending on the allocation of value (as calculated under 16 C.F.R. 801,10) of the voting securities and LLC interests/assets, it is possible thateither or both of these acquisitions would not cross the $50 million statutoryreporting threshold.
Basedon the legal structure described above, we concluded that Corporation and LLCare, respectively, their own ultimate parents. Moreover, since each entity isits own ultimate parent, the acquisitions would not be aggregated.
Basedon our conversation today, I understand that you agree that the acquisitions ofthe corporation and the LLC are separate transactions that need not be aggregated,and that if neither crosses the statutory threshold, no notification would berequired. If I have not stated the Premerger Notification Office's viewcorrectly, I would appreciate your letting me know.
Thank you again, and best wishes for the holidays.