Question
From: (redacted)
Sent: Wednesday, July 11, 2007 6:32 PM
To: Verne, B. Michael
Cc: Peay, SandraM.; Hallman, Renee A.
Subject: HSR Question
We have the following multi-stepped situation which wedesire FTC advice:
1.Newco(a shell corporation with no initial assets) will issue voting shares to thepublic in an attempt to raise $800,000,000 in cash.
2.Newcowill, immediately after Step 1 above, take a significant portion of the$800,000,000 and acquire the assets of three companies; those assets arecomprised of outstanding loans, mortgages, receivables (akin to a factoringarrangement, where money is lent against the borrower's receivables), and thelike. Also included in those assets are certain real properties which wereacquired as a result of foreclosure on various mortgages. Those real propertiesconsist of hotels and some other real estate development projects (developmentof condominiums).
3.Simultaneouswith Steps 1 and 2 above, a management company ("MANCO") that wasmanaging the three companies that held the loans, mortgages, etc. (as well asoriginating the loans, coordinating each of the transactions, etc.), will sellits assets as a "going concern" to Newco in exchange for $18,000,000cash and voting stock of Newco worth about $100,000,000. MANCO's hard assetsconsist of desks, office equipment and the like. Also, all of the employees ofMANCO will move over to Newco. However, most of the value of the $118,000,000(assume over $100,000,000) is goodwill attributable to the going concern natureof the business being transferred.
I am assuming Step 1 and Step 2 areexempt, as Newco will only be acquiring "exempt assets", i.e., loans,receivables, mortgages and the above mentioned real property. Similarly, thepurchasers of the Shares of Newco will be exempt under 802.4. Furthermore, MANCO'sacquisition of the voting stock of Newco would be exempt for the same reason.In connection with the acquisition of the MANCO assets by Newco, MANCO's lastregularly prepared balance sheet (3/31/07) shows assets of approximately$7,500,000 (net sales are below $100,000,000). I am assuming that this shouldexempt the purchase of assets from MANCO from a filing under the Act, as MANCOdoes not meet the size of the party test. Please confirm whether my assumptionsare correct and thus no HSR filing is necessary. If my assumptions in thisparagraph are incorrect or there are additional factors that need to beconsidered or if you have questions or require additional information, pleaselet me know.
Thank you for you assistance.