Question
June 8, 2009
VIA E-MAIL
B. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
Re: Hart-Scott-Rodino Informal Interpretation
Dear Mike:
Thank you for taking the time to speak (redacted)with and me last week regarding our Hart-Scott interpretation question. I amwriting to memorialize our understanding of our conversation. As you mayrecall, we presented you with the following scenario:
The proposed transaction involves two insurancecompanies, A and B. The transaction is designed to transfer to A the"renewal rights" to sign new insurance policies with certain insuredsof B when their existing policies with B expire. The transaction would beimplemented through the acquisition by A of the untraded voting securities of certaininsurance subsidiaries of B, pursuant to an acquisition agreement with thefollowing material features:
Presented with these facts, you agreed with thefollowing conclusions:
The renewal rights being acquired are notconsidered assets that need to be valued under Hart-Scott, and any valueattributed to them does not count towards the size-of-transaction threshold. Ifno acquisition price is determined for the untraded voting securities beingacquired, when calculating the fair market value of those securities Company Awould be entitled to view the underlying runoff business as having negligiblevalue because all profits and losses for the business will remain with CompanyB, and B will remain the operator of the business. Alternatively, in the eventthe parties determine an acquisition price for the untraded voting securities,when conducting an 802.4 analysis of the underlying assets Company A wouldsimilarly be entitled to view the underlying runoff business as havingnegligible value.
Please let me know if I have misstated ourconversation in any way or if you disagree with any of the conclusions above.As always, thank you for your time and assistance.