Question
Alice Villavencio
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re: Size of Party to Transaction pursuant to 18 C.F.R. 801.11
Dear Ms. Villavicencio:
In accordance with our conversation on June 11, 1998, the following is a summary of the transaction which we discussed. I would appreciate your opinion of whether the acquiring party satisfied the size of the party requirements pursuant to the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).
Our client has formed a holding corporation (“Holding Company”) and two wholly-owned subsidiary corporations of the Holding Company (“Sub-1" and “Sub-2", respectively) in order to acquire a wholly-owned subsidiary (the “Target”) of another corporation (the “Target’s Parent”).l The Target’s Parent has over $100,000,000 in annual sales and/or net assets. Holding Company is the ultimate parent entity of Sub-1 and Sub-2. Each of Holding Company, Sub-1 and Sub-2 are newly formed entities which prior to the consummation of the transactions described herein and the financing therefore have only nominal assets.
The acquisition of the Target will occur in two stages The later stage will occur within hours of the former (as soon as the cash payment described below is received by the Target). In the first stage, Sub-1 will purchase the receivables of the Target for a cash payment to be made by Sub-1 to the Target in the same amount of the receivables which is anticipated to be approximately $50,000,00. 1 The receivables purchase price will be borrowed by Sub-1 from a commercial lender. In the second stage, which is to occur immediately after the cash payment has been received by the Target, the Target will be merged with and into Sub-2 with Sub-2 being the surviving corporation. The Holding Company has no other assets attributable to it other than as is set forth above.
After explaining the basic structure of the transaction to you, it was your preliminary conclusion that the purchase of the receivables is incidental to the entire transaction, and consequently, the receivables would not be considered in determining the size of the Holding Company under the applicable provisions of the HSR Act.
I would appreciate any written confirmation you are able to provide with respect to this analysis. Please provide your response to me via facsimile (redacted) in the event that you have any questions regarding this matter, please do not hesitate to contact me.
Very truly yours,
(redacted)
The receivables are being purchased in this manner for bona fide tax planning purposes and inorder to satisfy certain requirements of the lender.