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Date
Rule
801.40
Staff
Richard Smith
File Number
9101001
Response/Comments
1/2/90 - advised (redacted) that we generally prefer to have the intermediary and final events occur at the same time. He said this would likely happen in the present case but since certain filings of papers may be needed, he used term “on the same day” or “ within a short period of time.” I confirmed that since initial (potentially reportable) steps were early transitory and in a continuum which would result in the creation of a partnership (non-reportable) our view is that no report is needed as long as subsequent event is certain and is an integral part of the transaction.

Question

(redacted)


January 2, 1991


Richard B. Smith, Esquire
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580



Dear Dick:


This letter serves to confirm our telephone conversation of Tuesday, December 4, 1990. During that conversation, you agreed that based on the facts I provided, the transaction described below as not reported. The facts we discussed are as follows:

Companies A & B, which control respectively, Partnerships C (a partnership to be formed) and D, are to exchange partnership interests in their partnerships. Company A will acquire a 1% interest in Partnership D from Partnership D, which is controlled by Company B, for the payment of $5 million cash. Company A will also receive a $10 million note from Partnership D which is convertible into a 9% interest in Partnership D. The consideration for the $10 million convertible note is Company As transfer to Partnership D of a 30% interest in Partnership C which Company A controls.


Partnership Ds acquisition of the 30% interest in Partnership C will be accomplished as follows.


Company A will transfer a 30% interest in the intangible assets of one of its business units (the unit) into a subsidiary which will transfer the assets to Partnership D. Company A and Partnership D will ten contribute their 70% and 30% interests in the unit assets to newly formed Partnership C in exchange for 70% and 30% interests in Partnership C.


Partnership D will be contractually committed to contribute the 30% interest in the assets which it receives from Company A and its subsidiary to the formation of Partnership C. The transfer of the assets to Partnership D and their subsequent contribution to the formation of Partnership C will likely occur on the same day, and in any event, will occur within a short period of time.


Given the facts set out above, it is my understanding that the Federal Trade Commissions Premerger Notification Office does not view the transfer of the 30% interest in the assets of the unit to Partnership D as reportable given that this is just an intermediate step in the partnership formation and exchange. I understand your caution that if Partnership D does not fulfill its contractual commitment to contribute the assets to Partnership C that a reportable transaction could occur without having been reported. I understand that ths would potentially subject each of the companies and partnerships to the penalties provided under the Hart-Scott-Rodino Notification Report Act of 1976 15 U.S.C. 18a (the Act), and I have so advised the parties.


If this letter does not currently reflect our conversation or mischaracterizes the view of the Premerger Notification Office, please contact me immediately. Unless I hear to the contrary by January 4, 1991, I will advise my client to rely on your advice that no reporting obligation arises.


Very truly yours,



cc: (redacted)

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