Question
One page fax transmission memo
(redacted)
March 30, 1998
Nancy Ovuka
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re:Applicability of H-S-R Premerger Notification Requirements
Dear Ms. Ovuka :
At your kind suggestion during our telephone conversation earlier today, I am briefly describing the transactions I called you about.
1.Company A is a corporation in a service industry with sales of under $10 million and few assets. All of the stock of Company A is owned by a single individual (Individual A) who probably has net worth in excess of $10 million. We have no reason to believe that Individual As net worth exceeds $15 million but could verify this if necessary.
2.Company B is a group of more than 20 sister companies, all in services business, with sales in excess of $100 million and net assets in excess of $15 million. A single individual (Individual B) owns, directly or indirectly, more than 50% of the stock of all but two of these companies and probably has de facto control of those two as well. [Note: Counsel claims each is its own UPE and doesnt meet the size-of person test] We believe that Individual Bs net worth is in excess of $100 million.
3.Company B wishes to acquire Company A and a letter of intent has been signed for a stock deal with consideration (all stock) valued at $9,375,000.
4.Company B is planning to initial public offering, which will require consolidation of the various companies constituting Company B under a single holding company.
5.Company Bs accountants have recommended that Company A be the consolidation vehicle. To accomplish this, Company A will establish subsidiaries mirroring each of the companies (with the exception of second tier subsidiaries) that constitute Company B, which companies will be merged into the new subsidiaries.
6.When these transactions are consummated, all the companies constituting Company B will own 97.98% of the stock of Company A and Individual B will control Company A.
7.We believe that the transactions described in paragraphs 3 and 5 above, taken separately, would not be subject to premerger notification, in the first case because the transaction does not meet the size of transaction test and, in the second case, because it is an intra person transaction. [Note: 802.20(b)]
8. While we believe that the result should be the same (no premerger notification required) for the combined transactions, because combining the two transactions into one crates some interpretative issues, we seek guidance from the Commission.
Please call me at (redacted) to discuss this. Many thanks for your helpfulness.
Sincerely,
cc: (redacted)