Question
April 11, 2005
VIA ELECTRONIC MAIL AND U.S. MAIL
Mr. B. Michael Verne
Premerger Notification Office
Bureau of Competition -
Federal Trade Commission
600 Pennsylvania Ave., NW
Washington, D.C. 20580
Re:, Confirmation of Advice Regarding 16 C.F.R. 802.4
Dear Mr. Verne:
In ourconversation last Friday, April 8, 2005, a transaction on the facts set forthbelow were described. We are writing to confirm the analysis and verbal advicewe received from you during that conversation.
Facts
CompanyA and Company B are currently 50-50 owners of a number of entities, some ofwhich are corporations and some of which are unincorporated entities'(collectively, the "JV Entities"). Company A will acquire the 50%interest of some of the JV Entities from Company B, and vice versa, Company Bwill acquire the 50% interest of some of the JV Entities from Company A. Inaddition, Company A will also acquire from Company B a group of assets with anaggregate fair market value of less than $53.1 million (the "BusinessAssets"). The Business Assets are currently wholly-owned by Company B.
Prior to theacquisition, Company B plans to form two new wholly-owned LLCs. One of theseLLCs will hold Company B's 50% interests in the JV Entities that Company A isacquiring, and the other LLC will` hold the` Business Assets: Company B thenplans to transfer 100% of the interests in both of the newly formed,wholly'-owned LLCs to Company A. The new LLCs will have no assets other thanCompany B's 50% interests in the JV Entities being transferred to Company A, inthe case of one of the LLCs, and the Business Assets, in the case of the otherLLC.
Discussion and Analysis
Wewanted to confirm that the proposed acquisition by Company A of 100% of theinterests of the two newly formed LLCs from Company B is exempt from HSR Act (notification) requirements. We understand that the exemptionavailable under Rule 802.4 (as amended effective April 7, 2005) has broadened. At the time of the acquisition by Company A, theassets of one of the newly formed LLCs by Company B will consist only of LLCinterests of the JV Entities, the acquisition of which (both the LLC interestsof the JV Entities, themselves, as well as the assets of the JV Entitiesthemselves) by Company A would be exempt under Rule 802.30 (the intrapersonexemption), since Company A already owns 50% of the JV Entities that Company Ais acquiring. As for the other LLC to be newly formed by Company B, that LLCwill hold only the Business Assets, which have a fair market value of less than$53.1 million.
Conclusion
Accordingly,the acquisition by Company A of the 100% interests of both of the new,wholly-owned LLCs of Company B would be exempt. With respect to one of the LLCsbeing acquired by Company A, Rule 802.4 has now been broadened such that theacquisition of an entity whose assets would be exempt under any of Part 802 (inthis case, as a result of 802.30) would be exempt. Here, Company A'sacquisition of the assets of the underlying JV Entities would be covered byRule 802.30 (intra-person), and therefore the acquisition of the non-corporateinterests of an entity which ultimately holds those assets would be exemptunder Rule 802.4 and thus would not be required to be reported. With respect tothe second of the LLCs being acquired by Company A, the value of the assetsbeing acquired in that case does not meet the size-of-the-transaction test, andtherefore the acquisition of the non-corporate interests holding those assetswould not be required to be reported.
Thank youagain for your assistance. It would be deeply appreciated if you wouldtelephone to confirm that this letter and the conclusions set forth herein havecorrectly stated your advice.