Question
(redacted)
August 23, 1988
REVISED COPY
VIA TELECOPIER (redacted)
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580
ATTENTION: Patrick Sharpe
Premerger Notification Under Hart-Scott-Rodino
Antitrust Improvements Act of 1976
Gentlemen:
This will confirm my telephone conversation with (redacted) of the morning. About two weeks ago I called (redacted) and related to him the factual situation set forth below; he indicated that a Hart-Scott-Rodino filing was not necessary at this time, but would be at a later date. I understand there has been subsequent contact with (redacted) by a (redacted) When I talked to (redacted) today and repeated the factual situation, he commented on its complexity and suggested that I write him.
The factual situation is as follows:
X and Y each own a fifty percent (50%) interest in an unincorporated partnership
(X-Y Company). Each party takes fifty percent (50%) of each product of X-Y. X-Y
has elected out of the partnership tax reporting obligation in accordance with the
appropriate section of the Internal Revenue Code. Since start-up, for a fixed term but
not for the entire life of the partnership, Y has agreed to sell to X its (Ys) share of
X-Ys products at arms length prices in accordance with the Internal Revenue
Code. For the last two (2) years X has delegated to S, its former subsidiary, the sales
function of such products for a nominal commission; S has also performed certain
management functions for X-Y on a cost reimbursement basis. (S is a very large
consumer of X-Ys products.)
X and Y now propose to convey to S or its nominees X and Ys respective
partnership interests in X-Y it is not clear that the two (2) partnership interests
would be conveyed to the same legal entity thereby causing an automatic
dissolution of the partnership. S would immediately pay a sum certain to X
which would retain liability for the debt of X-Y and S would immediately
assume virtually all management responsibilities along with the benefits and
liabilities of X-Ys operation and the sale of its products. Formal conveyance
of the partnership interests would be seven (7) months hence upon the almost-
certain retirement of debt for which the assets of X-Y are security. In the most
unlikely event such security is not released, the deal between S, and X and Y
would be rescinded.
The issues are whether or not a filing must be made under the Hart-Scott-Rodino Act and, if so, when.
I realize that the factual situation is complex; if you wish any further elaboration, please call me at (redacted).
Very truly yours,
(Redacted)
(Redacted)