Question
March 10, 1983
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
Mr. Andrew Scanlon
Premerger Notification Office
Bureau of Competition
Room 301
Federal Trade Commission
Washington, D.C. 20580
Re: Confirmation of Prior Discussion
Dear Mr. Scanlon:
The purpose of this letter is to confirm the informal
interpretation you gave to me by telephone pursuant to FTC
Rule 803.30 with respect to the application of the premerger
notification rules of the Hart-Scott-Rodino Act to the
series of transaction described below.
Fact. In 1977 A and B, both of which are corporations
with sales and assets in excess of $100 million, organized X
as a partnership. The partnership form was selected for tax
reasons, and it was intended that X would engage in the
development of a number of new products. A and B have each
owned a 50% interest in X from the time of its formation to
the present.
The parties are now considering whether to change the
form of the organization of X, in tow stages, from a partner-
ship to a corporation, but there is no intention to change
the essential fact that A and B will each continue to own
50% of X.
In the first stage, A and B would each organize wholly
owned subsidiaries (referred to hereafter as Sub-A and Sub-
B, respectively). Thereafter, A and B would each transfer
their respective interest in X to their new wholly owned
subsidiaries. Thus, at the conclusion of these steps, A
would own 100% of the stock of Sub-A, B would own 100% of
the stock of Sub-B, and Sub-A and Sub-B would each own a 50%
partnership interest in X.
In the second stage, some time after the above steps
are consummated, it is proposed that Sub-A merge into Sub-B.
The merged company would change its corporate name from Sub-
B to X, Inc. at the moment the merger is effective. X, Inc.
would, of course, by virtue of the merger, be the owner of
the entire interest in partnership X. A would exchange its
100% stock interest in Sub-A for 50% of the stock of X, Inc.
(formerly Sub-B). Thus, A and B would each continue to own
50% of the venture after the merger. Following the merger
described above, the X partnership would be dissolved and
its assets transferred to X, Inc.
At the conclusion of our discussion, you advised me
that each of the steps described above would be exempt from
notification pursuant to FTC Rule 802.30. This is because
the transaction does not result in a change of ownership of
any interest in X venture: both now and at all times in the
future A and B (each persons as defined in Rule 801.1(a))
will own 50% of the venture, as in the past.