Question
From:
(redacted)
Sent:
Tuesday, May 26, 2009 2:54 PM
To:
Verne, B. Michael
Subject: Question regarding incidental expensesunder 801.11(e)
Once more, thanks for being so cooperative with thislogistical confusion!
_______________________________________________________
From: (redacted)
Sent: Tuesday, May 19, 20094:23 PM
To: 'bmverne@ftc.gov'
Subject: Question regarding incidental expenses under 801.11(e)
I am writing to memorialize our recentconversation regarding your conclusion that the transaction described below isnot reportable under the HSR Act by virtue of 16 CFR 801.11(e).
As we discussed, two newly-formed LLCs, eachwithout a regularly prepared balance sheet, and each its own ultimate parententity, are purchasing a group of motor fuel retail outlets for cashconsideration of $135 million. They have also executed a contract with theseller, whereby the seller will provide motor fuel for these outlets for atleast ten years. That supply contract requires that the purchasers obtain a$13.5 million letter of credit to secure payment for the motor fuel. Therefore,the LLCs will have $148.5 million in cash at the closing. Post-closing theirassets will consist of the outlets and a $13.5 million deposit at theinstitution issuing the letter of credit.
The outlets would not be purchased unless thepurchasers had the benefit of the supply agreement and the supply agreement isconditioned on the purchase of the outlets. Therefore, the supply agreement andthe purchase agreement are inextricably intertwined.
You advised that for the purpose of determiningwhether either LLC satisfies the size-of-person, its assets should not includethe $13.5 million deposit under the letter of credit, because that depositwould be considered an expense incidental to the acquisition, which can beexcluded for size-of-person purposes by virtue of 16 CFR 801.11 (e).
If this does not reflect your conclusion thenplease let me know at your earliest convenience. This transaction is scheduledto close as early as next week.