Question
May 23, 2003
Mr. Michael Verne
Premerger Notification Office,
Room H-314
Federal Trade Commission,
Bureau of Competition,
600 Pennsylvania Avenue, N.W.,
Washington, D.C. 20580.
Re: Request for Informal Interpretation Regarding Applicability of the Notification and Waiting Period Requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976
Dear Mr. Verne:
I write to follow up on our telephone conversation of yesterday regarding my request for an informal interpretation of the notification and waiting period requirements (the "Requirements") of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "Act") as applied to the proposed acquisition (the "Acquisition") described in this letter. Following our telephone conversation, T obtained additional information regarding the parties and the Acquisition, which I believe confirms my expectation that the acquisition is exempt from the Requirements under Rule 802.51(b) because the issuer lacks the requisite quantity of United States assets and "sales in or into the United States". For your convenience, I will fax the letter to you then telephone you to discuss the relevant considerations.
As f indicated during our telephone conversation yesterday, the Acquisition involves the purchase by (redacted) of voting securities of (redacted) Holdings Limited (redacted) is a corporation engaged the business of reinsurance and is organized under the laws of, and headquartered in, France. (Redacted) is a corporation engaged in the business of reinsurance, and is organized under the laws of, and headquartered in, the Republic of Ireland.
Currently, there are three shareholders of (redacted), which holds 46.68% of the outstanding voting securities of (redacted), which holds in the aggregate (through four wholly-owned subsidiaries) 46.64% of (redacted) outstanding voting securities; and (redacted) which holds the remaining 6.66%. The acquisition involves the pro-rata allocation of (redacted) holdings of (redacted) stock to (redacted) and (redacted). As a result of that acquisition (redacted) would holde 50.02% of the outstanding voting securities of (redacted) and (redacted) would hold the remaining (redacted) shares. There are five directors of (redacted) has the right to designate two of those directors, and (redacted) has the right to designate one director. The- remaining two directors are independent directors, who are selected through voting by the (redacted) shareholders. As a result of the Acquisition, (redacted) effectively would have the right to appoint four of the five (redacted) directors.
Since the formation of (redacted) has exercised managerial control over (redacted) and has fully consolidated (redacted) financial results into (redacted) financial results for purposed of (redacted). Pursuant to a shareholder agreement entered into at the time of the formation of (redacted) has committed to purchase all shares of (redacted) held by the other shareholders by no later than May 2006 and (redacted) expected to cease all operations as of that time.
Since (redacted) formation, all of that company's commercial endeavors have consisted of the entry into Quota Share Arrangements between (redacted) either directly or through a wholly-owned subsidiary) and (redacted) or (redacted) subsidiary in United States. Pursuant to the Quota Share Arrangements, (redacted) assumes a portion of certain (redacted) reinsurance obligations in exchange for premium payments to (redacted) by (redacted). Thus to-date, all of the "sales" have resulted from reinsurance premiums paid by (redacted) in connection with Quota Share Arrangements: (Redacted) has the right to provide reinsurance to third parties (on a joint basis with (redacted) in amounts of up to 10% of (redacted) annual premium revenues; but, to-date, (redacted) has not engaged in such third-party business.)
(Redacted) is not registered or licensed as a reinsurance company in any jurisdiction in t tl-a United States. We understand that (redacted) conducts all of its business through offices in (redacted) and does not maintain an office or conduct or solicit business in the United States. We further understand that, in the fiscal year ended December 31, 2002, (redacted) approximately 111.6 million from reinsurance premiums from (redacted). We understand that all of the communications regarding the reinsurance arrangements from which those premium revenues were earned occurred either by telephone or in writing or through in-person communications that took place outside the United States. The Quota Share Arrangements were signed in Dublin by (redacted) and in the United States by (redacted).
In view of these considerations, it appears that (redacted) neither holds assets located in the United States nor made sales in or into the United States in it most recent fiscal year. Accordingly, we have concluded that, even though (redacted) would acquire control (for purposes of the Act) of (redacted) is a result of the Acquisition, the Acquisition is exempt from the Requirements pursuant to Rule 802.51(b). We would appreciate your confirming whether the Premerger Notification Office concurs in that conclusion.
In view of the nature of this communication, (redacted) respectfully requests that the Premerger Notification Office accord confidential treatment of this letter and hold exempt from any request for public disclosure pursuant to the Freedom of Information Act any portion of this communication that could lead to identification of the Acquisition, or the parties involved in, or terms of, the Acquisition.
I look forward to the opportunity to discuss with you the contents of this letter. Thank you for your attention to this matter.