Question
January 11, 2007
Mr.B. Michael Verne
PremergerNotification Office
Bureauof Competition
FederalTrade Commission
7th& Pennsylvania Avenue, NW
Washington, DC 20580
Dear Mike:
I am writing to confirm my understandingof a telephone conversation we had on December 29, 2006 concerning the non-reportability under the Hart-Scott-Rodino AntitrustImprovements Act of 1976, as amended ("HSR Act"), of a proposedtransaction discussed below.
Proposed transaction
Pursuant to a Purchase Agreement, the Sellers willsell all of their limited partnership interests (the "Interest") inthe Partnership, a limited liability limited partnership. The Sellers are two Delawarelimited liability companies, which are each wholly owned subsidiaries of acommon parent. Under the Purchase Agreement, the Sellers' Interest will be soldback to the Partnership, but the Partnership may assign its right to purchasethat Interest at its discretion.
The outstanding limited partnership interests of thePartnership are divided into two classes of interests with the economic rightsin terms of rights to profits of the Partnership or rights to assets upondissolution of the Partnership varying as between those classes. The interestof the sole general partner of the Partnership consists of approximately .1 percentof the common equity of the Partnership. The Sellers' Interest, all of which iscontemplated to be transferred in the proposed transaction, consists of aminority share of each class of interests. Neither Seller individually has, andthe Sellers collectively, do not have, the right to 50% or more of the profitsof the Partnership, or the right, in the event of dissolution, to 50% or moreof the assets of the Partnership.
The remaining limited partnership interests are allowned by Majority Partner, a limited liability company, which also owns thegeneral partner of the Partnership. The Majority Partner already owns a greaterthan 50% interest in each class of the Partnership interests. Accordingly, theMajority Partner has the right to 50% or more of the profits of thePartnership, or the right, in the event of dissolution, to 50% or more of theassets of the Partnership.
Conclusions
You agreed that the transaction described above isnot HSR reportable regardless of the size of the transaction or the size of theparties to the transaction. Specifically, you confirmed that this transactionwould be exempt under 16 C.F.R. 802.30 as an intraperson transaction for any acquisition of the Interest bythe Partnership or the Majority Partner since Majority Partner already controlsthe Partnership for HSR purposes under 16 C.F.R. 801.1(b). You agreed that this conclusion was not affected by the fact that theMajority Partner acquired its controlling stake in the Partnership with no HSRreporting obligation since it acquired such position prior to April 7, 2005,that is, at a time when the FTC's position was that the acquisition of a lessthan a 100% interest in a limited liability partnership was never reportable.
You also continued that in the event that Partnershipassigned its right to purchase the Interest to an entity not related to theMajority Partner, the acquisition of the Interest by the third party would beexempt under 16 C.F.R. 801.2(0(1) since that third party only would hold a minority interest in anon-corporate entity.