Question
August 12, 2009
Michael B. Verne
Premerger Notification Office
Federal Trade Commission
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580
Dear Mr. Verne:
Thisletter is to confirm our discussion of July 29, 2009 regarding whether thetransaction described below would trigger the premerger notification and filingrequirements of the Hart-Scott-Rodino Act ("HSR"). We concludedduring our conversation that no such notification or filing is required.
CompanyA is a North Carolina non-profit hospital system, which owns and operates twolicensed, acute care hospitals. Company B is a North Carolina hospitalauthority, which owns and operates one licensed, acute care hospital. Company Aand Company B intend to form a joint operating company ("JOC") thatwill be organized as a North Carolina non-profit corporation. The JOC willoperate Company A's and Company B's hospitals as a unified healthcare deliverysystem. Company A and Company B will serve as the JOC's sole corporate members.The JOC's board will initially consist of twelve (12) members, with four (4)directors appointed by Company A, four (4) directors appointed by Company B,and four (4) directors appointed on an at-large basis. 1
CompanyB was created under the Hospital Authorities Act, codified at Chapter 131E-15 etseq. of the North Carolina General Statutes. Company B's board is appointedby the County Board of Commissioners for the county in which Company Boperates. Hospital authorities are defined by statute as a "public bodyand a body corporate and politic." N.C.G.S. 131E-16(14). The HospitalAuthorities Act provides, among other things, that North Carolina hospitalauthorities shall have the power of eminent domain and the power to issuerevenue bonds.
N.C.G.S. 131E-24, - 26.
Wehave reviewed the financial statements for Company A and Company B that wereprepared in the ordinary course of business in September 2008. Based onour review, we determined that neither entity has total assets or net sales inexcess of $130.3 million.
Inlight of the above, we concluded that an HSR filing will not be required withrespect to the formation of the JOC. This determination is based on twoprinciples. First, neither party meets the size-of-person test under 15 U.S.C.18a(a)(2). Second, given Company B's status as a North Carolina hospitalauthority, the transaction is exempt from notification under 15 U.S.C. 18a(c)(4)as a "transfer to or from ...a State or political subdivisionthereof."
Please let me knowif I misinterpreted our discussion or if you have any questions about theforegoing. Many thanks for your assistance in this regard.
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1The JOC will ultimately enter into a managementservices agreement ("MSA") with Company C, another North Carolinahospital authority. Pursuant to the MSA, Company C will manage the JOC'sday-to-day operations, but Company C will not acquire any voting securities orassets in connection with the MSA.