1111007 Informal Interpretation

Date:
Rule:
802.4
Staff:
Michael Verne
Response/Comments:

  - Sorry -the 802.4 analysis has nothing to do with the size of transaction. Once you have determined that the transaction is reportable, the valuation of the non-corporate interests takes into account all assets held by the JV. See the attached tip sheet: http://www.ftc.gov/bc/hsr/802 4tipsheet.shtm  

Question

From: (Redacted)
Sent: Monday, November 14, 2011 3:59PM
To: Verne, B.Michael
Subject: HSR question regarding filing fee

Dear Mike,

A client, Corporation A,is creating an unincorporated joint venture ("JV') with Corporation B.Both parties are contributing assets to the JV. Corporation A will receive morethan 50% of the JV's membership interests, while Corporation B will receive aminority interest.

Pursuant to 16 CFR 801.50(b), Corporation A is subject to the requirements of the HSR Act since itwill acquire non-corporate interests which confer control of the JV. On theother hand, Corporation B will acquire non-corporate interests which do notconfer control of the JV and therefore its acquisition is not reportable underthe HSR Act.

With regard toCorporation A's acquisition, the assets being contributed by Corporation A tothe JV are exempt pursuant to 16 CFR 802.30(c). The assets being contributedby Corporation B have a fair market value in excess of $66 million. Therefore,upon closing, the JV will hold non-exempt assets valued in excess of $66million. As a result, Corporation A plans to file HSR in connection with theformation of the JV.

However, I am notentirely clear how we should calculate the fair market value of the non-corporateinterests that Corporation A will hold as a result of the acquisition forpurposes of calculating the filing fee.

I would think that (1)pursuant to 16 CFR 802.4, the JV's exempt assets should be excluded from thecalculation, and (2) the FMV of the non-corporate interests that Corporation Awill hold is equal to (i) the value of the JV's non-exempt assets times (ii)Corporation A's percentage ownership of the JV.

By way of example, if theassets being contributed by Corporation A are worth $1.4 billion and the assetsbeing contributed by Corporation B are worth $700 million, and Corporation A isacquiring 66% of JV, it seems to me that the FMV of the non-corporate intereststhat Corporation A will hold as a result of the acquisition is $462 million(i.e., $700 million x 66%) and therefore the filing fee is $125,000.

Do you agree?

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