Question
(redacted)
November 15, 1985
CERTIFIED MAIL
Return Receipt Requested
Andrew Scanlon, Compliance Specialist
Federal Trade Commission
Premerger Notification Office
6th & Pennsylvania Avenue, Room 303
Washington, D.C. 20580
Dear Mr. Scanlon:
I would like to confirm our conversation of November 14 regarding the transfer of goods in the ordinary course of business.
(redacted) and wholly owned subsidiary of (redacted) corporation which in turn is a wholly owned subsidiary of (redacted) will sell its private label business to (redacted). The private label business consists of the following assets:
A.Real property, warehouse, plant, machinery and equipment located in (redacted).
B. Packing, blending and support equipment located at (redacted).
C.Customer lists, goodwill and a few trademarks.
and the following liabilities:
A.(redacted), lease and contract packing agreement.
B.Other contracts, leases, commitments, etc. as the parties may agree at Closing.
The purchase price for the assets is the net book value of the Assets as of Closing. The net book value as of September 30, 1985, was (redacted). (redacted) will pay cash in the amount of the net book value, to be adjusted to the Closing date. In the event that (redacted) assumes a $750,000 13.5% Note due December 31, 1990, the cash at Closing will be reduced by the amount of the Note.
At Closing, (redacted) will enter into a separate contract packing arrangement that will provide for (redacted) purchase of (redacted) inventory on an as needed basis. The inventory will include (1) inventory existing in warehouses at Closing (currently estimated to be valued at $21 million); (2) inventory for which there are commitments prior to Closing to accept after Closing, and (3) inventory for which commitment might be made after Closing. The contract packing arrangement is set our in paragraph 8 of the Letter of Intent, a copy of which is attached.
We anticipate that much of the inventory will be consumed in the contract packing relationship within six months. At some point in time, (redacted) will purchase its own inventory of raw materials to be contract packed by (redacted). As you will note the tangible assets to be sold to (redacted) for approximately $2,000,000 do not include assets of (redacted) California packing plant where the contract packing agreement will be performed.
Accordingly, this letter confirms our conversation that the inventory purchased on an as needed basis in the course of a contract packing arrangement is not subject to the Acts notification and waiting period requirements, because the transfer falls within the exemption for goods transferred in the ordinary course of business. Finally, you indicated that if this was not the case you would get back to me as soon as possible.
Again, thank you for your assistance.
Very truly yours,
(redacted)
(redacted)
STAFF COMMENTS: OK AMS 11/20/85