Question
July 10, 2009
VIA FAX(202/326-2624)
AND FEDERAL EXPRESS
Mr. B. MichaelVerne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 303
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mike:
Thepurpose of this letter is to confirm our telephone conference on July 10, 2009in which you concluded that, under the facts described below, the followingtransaction was exempt from the notification requirements of theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The relevantfacts, as we discussed them, are as follows:
A and Bcontemplate forming a new holding company as a limited liability company("Holdco") to finance the construction and operation of an interstatenatural gas pipeline system (the "Project"). The System is presentlyunder development by A's wholly-owned subsidiary, A Pipeline LLC ("ASub"). The only assets of A Sub are comprised of assets relating to theProject, including land rights, pipe and pipeline materials, surveys, studies,contracts, permits and permit applications. No revenues have been generated bythe Project.
Holdco will be ownedby A and B on a 50/50 ownership basis. A will contribute to Holdco all of themembership interests of A Sub, which will become a wholly owned subsidiary ofHoldco. A and B will contribute an equal amount of cash to Holdco. A and B bothhave agreed to extend loans in an equal dollar amount to Holdco. Thesize-of-person and size-of-transaction tests both will be met. At the time offormation, Holdco will borrow an amount under the loan from B equal to 50% ofthe value of A Sub, which loan proceeds will be distributed to A.
Based on ourconversation and the facts described above, we concluded that the formation ofHoldco is exempt under the following analysis. The Project qualifies for theunproductive real property exemption under Section 802.2(c). A's acquisition ofmembership interests in Holdco is exempt under Section 802.4, as from A'sperspective, Holdco's assets are comprised of all of the cash contributed by Aand B (pursuant to Section 801.21) and A's contribution of A Sub's membershipinterests (pursuant to Section 802.30(c)). B's acquisition of membershipinterests in Holdco also is exempt under Section 802.4, as from B'sperspective, Holdco's assets are comprised of all of the cash contributed by Aand B (pursuant to Section 801.21) and A's contribution of A Sub's membershipinterests (pursuant to Section 802.4). Even if A's contribution of the A Submembership interests is viewed as the acquisition of those interests by Holdco,the purchase would be exempt pursuant to Section 802.30(a) for A and pursuantto Section 802.4 for B.
Please call meimmediately at (redacted) should the position of the Federal Trade Commissionstaff with regard to this matter be different from that set forth above. Inaddition, please retain this letter in your files. I appreciate very much yourassistance and helpful advice on this matter.