Question
October 7, 2005
Via Electronic Mail & FedEX
Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
7th & Pennsylvania Avenue, NW
Washington, DC 20580
Re: Reportability of confidentialtransaction under Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
Dear Mike:
I am writingto confirm my understanding of our telephone conversation on October 7, 2005 concerning whether the transaction, described in detail immediatelybelow, is exempt from reporting under the Hart-Scott-Rodino AntitrustImprovements Act of 1976, as amended ("HSRAct").
Our client("Acquirer") intends to acquire, pursuant to a Stock PurchaseAgreement, 100% of the shares of a privately traded issuer("Issuer"). Issuer is not a "foreign issuer" as defined by16 C.F.R. 801.1(e)(2)(ii), because it is incorporated in the United States. Nevertheless, Issuer's operations areconducted primarily through a company whose principal offices are locatedoutside of the United States. Issuer and its subsidiaries generated,in total, less than $53.1 million from sales in or into the United States in its most recent fiscal year.
As amendedin April 2005, Section 802.4 provides in relevant part: "An acquisition ofvoting securities of an issuer . . . whose assets together with those of allentities it controls . . . consist of assets whose acquisition is exempt fromthe requirements of the Act pursuant to . . . this part 802 . . . is exemptfrom the reporting requirements if the acquired issuer . . . and all entitiesit controls do not hold non-exempt assets with an aggregate fair market valueof more than [$53.1M]."
As wediscussed, Issuer's assets primarily are located outside of the United States, and as such, the acquisition of suchassets would be exempt under part 802 - specifically Section 802.50 - if thosenon-U.S. assets did not generate $53.1 million of sales in or into the United States in its most recent fiscal year. Becausein this instance that is the case, Section 802.4 would permit the exclusion ofthe exempt, non-US assets from the determination of whether the $53.1 millionsize-of-transaction threshold is exceeded. We agreed that the remaining inquiryunder Section 802.4 concerns the fair market valuation of the non-exempt assets(i.e., the U.S. assets of Issuer). Under Section801.10(c), the fair market value of such assets must be determined by the Boardof Directors of Acquirer or its designee, within the 60 days prior to closing.If the fair market value of the United Statesassets of Issuer does not exceed $53.1 million, we believe that thistransaction is not reportable under the HSR Act.
In summary,you confirmed our analysis. Specifically, the entire transaction as describedabove is exempt under Section 802.4 of the HSR Actif the value of the U.S.-based assets do not exceed $53.1 million.
Pleasecontact me at (redacted) as soon as possible if I have misunderstood ourconversation or incorrectly set forth your understanding of the HSR Act.