Question
July 26, 2007
Mr. B. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
7th & Pennsylvania Avenue, NW
Washington, DC 20580
Dear Mike:
I am writingto confirm my understanding of a telephone conversation we had on July 24, 2007 relating to the applicability ofthe Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSRAct") to a proposed transaction.
ProposedTransaction
The purchaser isacquiring the stock of two non-publicly traded corporations. Both corporationsare owned by a common parent, the seller, but the parent entity is not beingacquired. The purchaser will pay to seller $80 million at closing, with $60million of that amount to be used by seller to pay off the outstanding debt ofthe two issuers being acquired.
Conclusion
You agreed that theproposed transaction would be HSR exempt as the value of the transaction forHSR purposes would be $20 million, and thus below the $59.8 million size of thetransaction test. See 16 C.F.R. 801.10(a)(2)(i). Specifically, you confirmedthat in this context of the acquisition of non-publicly traded votingsecurities, the value for HSR purposes would be based on the acquisition price,and the acquisition price would not include amounts to pay off the debt of theacquired issuers regardless of whether the buyer paid off the debt directly ortransferred funds to seller at closing for the seller to pay off the debt ofthe issuers to be acquired. You also confirmed that where, as here, two or moreissuers are being acquired by the purchaser from a common parent that theconclusion of non-reportability would not change regardless of how the debt wasallocated among the issuers being acquired.
Please let me knowas soon as possible if you disagree with any of the conclusions discussedabove, or if I have misunderstood any aspect of your advice. Thank you for yourassistance in this matter.