Question
From:
(Redacted)
Sent:
Tuesday, October 27, 2009 1:59 PM
To:
Verne, B. Michael
Cc:
(Redacted)
Subject: OrdinaryCourse and Credit Card Business Sale
Dear Mike, I hopeall is well. We are writing to confirm the applicability of the "ordinarycourse" exemption under 15 USC 18a(c)(1) -7A(c)(1) of the HSR Act to the factspresented below.
Facts Presented
Bank A is a US bank, engaged in a variety of financial and non-financial businesses, including thecredit and charge card business. Bank A conducts its credit and charge cardbusiness through a number of subsidiaries and divisions. The acquiring party,Bank B, is also engaged in the business of issuing credit cards.
Bank A iscontemplating a transaction in which it will sell a portion of its commercialcredit and charge card portfolio and certain related assets. The portion beingsold is operated under a specific brand (the "Card Brand"). Followingthe transaction, Bank A will, however, remain in the consumer and commercialcredit card under other brands and charge card business and its business ofissuing private label credit cards (i.e. cards that are merchant-specific) toboth commercial customers and individuals.
The transactionwill be effected pursuant to a purchase and sale agreement whereby the buyer,Bank B, will acquire (a) the accounts, receivables, cardholder lists, books andrecords, and other assets associated with the Card Brand and (b) the votingsecurities of a US entity ("Card Co.") whose only (material) assetsare various contracts entered into in connection with the operation of the CardBrand. These include various agreements related to: (a) exchanging card"points" for rewards (such as frequent flyer miles, hotel stays,gifts, etc); (b) offering credit cardholders various benefits as card members(such as access to airport lounges, telephone services); (c) marketing servicesrelated to the Card Brand (such as trade show participation, advertisingprinting and distribution) and (d) a franchise agreement with the owner of theCard Brand allowing the Card Brand to be used on cards in North America andwith a card association allowing the cards to be co-branded with the cardassociation's brand.
We can assume forpurposes of this analysis that the size of parties threshold is satisfied.
HSR Analysis
1.Asset Acquisition. Based on currently policy,we understand that the acquisition of the accounts, receivables, and relatedassets of the Card Brand by Bank B are exempt from HSR Act reporting under theordinary course exemption given that Bank A will continue its consumer andcommercial credit card and charge business and its business of issuing privatelabel credit cards (i.e. cards that are merchant-specific) to both commercialcustomers and individuals. We understand that this exemption would apply evenif Bank A will be prohibited, following the sale, from issuing cards under thespecific Card Brand that is sold.
2.Card Co. Acquisition. As all of thecontracts held by Card Co. are used by Bank A solely to service cardholders ofthe Card Brand accounts that are being acquired, we believe that these assetsare also HSR exempt assets under the ordinary course exemption. Thus, pursuantto Section 802.4 of the HSR rules, the acquisition of the Card Co. votingsecurities would also be exempt.