Question
From: (redacted)
Sent: Wednesday, December 28, 2005 4:43 PM
To: Verne,B. Michael
Subject: HSR Compliance Question
Dear Mr. Verne,
Iwould appreciate it if you could provide me guidance with respect to thefollowing HSR question.
PartyA and Party B presently are co-parties in a joint venture. The joint venture isstructured as a general partnership, and each of the parties has a 50% generalpartnership interest in the joint venture, including the right to 50% of the profitsof the joint venture and 50% of its assets after the payment of its debts inthe event of its dissolution. Party B now contemplates exiting the jointventure by selling its 50% general partnership interest in the joint venture toParty A.
Ifthe size-of-transaction and size-of-person tests were met, would the proposedacquisition be subject to the HSR Act? More specifically, is it possiblefor a controlling party of a non-corporate entity to acquire control of thatentity within the meaning of 16 C.F.R. Section 801.2(f)(1)(i) and therebytrigger a premerger notification filing requirement where it holds exactly 50%of the noncorporate interests in that entity before the acquisition andacquires the remaining 50% as a result of the acquisition?
Under16 C.F.R. Sections 801.1(b)(1)(ii) and 801.2(f)(1)(i), a reportable acquisitionof noncorporate interests for HSR purposes occurs when an acquiring personacquires "control" of an unincorporated entity where"control" means having the right to 50% or more of the profits of theentity, or having the right to 50% or more of the assets of the entity afterthe payment of its debts upon its dissolution.
PartyA already has control of the joint venture within the meaning of Section801.2(f)(1)(i) pursuant to its 50% general partnership interest. Therefore, itseems counterintuitive that its purchase of Party B's 50% general partnershipinterest would be deemed to be an acquisition of control subject to the HSR Act, although it is literally an acquisition of the right to 50%or more of the profits of the general partnership and the right to 50% or moreof its assets in the event of dissolution.
Ihave not been able to locate any specific guidance on this topic, and anyclarification that you may be able to provide would be appreciated.