Question
VIA FACSIMILE
April 30, 1993
Patrick Sharpe
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580
Dear Mr. Sharpe:
On April 14, 1993, I wrote a letter to you in which I described a proposed (redacted) The purpose of thatletter was to determine whether the acquisition in question would be considered reportable under the Hart-Scott-Rodino Act.
As you may remember, the result of that inquiry was a conclusion that the (redacted) should be reported. Thepurpose of this letter is to confirm our more recent conversations as to which entity should be filing on behalfof the acquiring person.
The acquiring person will be a partnership which is in the process of being formed (the New Partnership)for the sole purpose of purchasing the (redacted) The ownership of the New Partnership is broken down asfollows:
Description of Partner Partnership Percentage Ownership of
ABC Co., a corporation whose shares are
owned by D, and individual (General Partner) 1%
A, an individual (Class A Limited Partner) 49%
B, an individual (Class A Limited Partner) 1%
C, an individual (Class B Limited Partner) 25%
D, an individual (Class B Limited Partner) 24%
100%
None of A, B, C, or D will own greater than a 49% interest in the New Partnership. However, as we advisedyou, the Class A limited partners (A and B) are each entitled to a cumulative preferential return on theirinvested capital during the term of the partnership and, upon liquidation of the partnership, are entitled to apreferential return of their entire invested capital. The New Partnership will be initially capitalized byinvestments from all partners totaling $3,000,000.
It is not anticipated that the cash flows of the New Partnership during the term of the partnership agreement,or the distributable assets of the New Partnership in the event of a dissolution or liquidation will be insufficientto result in all of the partners receiving prorata distributions in accordance with their respective percentageownership interests as outlined above. However, there is always the contingent possibility, because of thepreferential position of the Class A limited partners, that A might receive greater than 50% of partnership cashflow or greater than 50% of partnership assets at the time of a liquidation.
For example, we know that A will be investing [note 1] capital equal to 49/100 of $3,000,000, (or$1,470,000). If the (redacted) (which constitute all of the assets of the New Partnership) were to deterioratein value to a point where, in the event of a liquidation of the New Partnership, there would be only $1.000.000of liquidation proceeds distributable to the partners, then A and B would receive 100% of that sum as apreferential distribution and C, D and ABC Co. would receive nothing. Under such circumstances, A wouldreceive $980.000 of the $1,000,000 in distributable liquidation proceeds.
Although there [note 2] are contingencies under which A could receive 50% or more of partnership profitsof partnership assets in the event of a liquidation, you advised me that the [note 3] Department would lookto the stated percentage ownership interests as reflected above to [note 4] determine the ultimate parent entityfor the purposes of a Hart-Scott-Rodino filing. As a consequence, it was your conclusion that the NewPartnership, and not A, is the acquiring person and the proper party to submit the premerger notification reportin the transaction in question.[note 5]
I would appreciate your telephoning me after your receipt of this letter to confirm verbally that my conclusionsas stated in this letter are correct and that this letter will be placed in your business files.[note 6]
Very truly yours,
(Redacted)