8303009 Informal Interpretation

Date:
Rule:
801.40
Staff:
Dana Abrahamsen

Question

(redacted)

March 25, 1983

Dana Abrahamson, Esquire
Federal Trade Commission
Washington, D.C. 20580

Dear Mr. Abrahamson:

Confirming our telephone conversation of the last two weeks, the

following planned transaction is not reportable under the Hart-Scott-

Rodino Act.

(Redacted ) is a wholly-owned subsidiary

of the ( redacted ), an ultimate parent entity with sale and

assets substantially in excess of $100 million. (Redacted) proposes to

sell certain outlets to a newly-formed Delaware corporation, (redacted)

( redacted ) in a transaction which will substantially

exceed $25 million (aggregating payments made and assumed liabilities).

Ownership of (redacted) will be as follows upon closing of the transaction.

(Redacted), a natural person, will own 48% of the voting stock. A

voting trust for stock owned by (redacted), another natural person, will

hold 12% of the voting stock. (Redacted) will have the contractual

right to vote all stock held by this voting trust. He will thus own

or control 60% of the voting stock. The remaining 40% of the voting

stock will be owned by (redacted). (Redacted) will own all of the preferred

stock of (redacted). Upon the happening of certain events of default, (redacted)

may be entitled to utilize rights stemming from this preferred stock

to elect a majority of the board of directors of (redacted). (Redacted) would continue

to have this right only until the default or defaults were cured.

Under these facts, (redacted) and only (redacted) is deemed the

ultimate Parent of (redacted). Though (redacted) may have the contractual right

to elect a majority of the board of directors upon the happening of

certain contingencies, it has no present right to do so. Neither

(redacted) nor (redacted) holds business assets of $10 million or more. The

proposed sale of assets by (redacted) to (redacted) is not reportable because

(redacted), (redacted) ultimate parent, is not a $10 million Person. This is

so even though (redacted) expects to have unused line of credit exceeding

$10 million after acquiring the assets from (redacted). The line of credit

test for determining a persons size is an informal test which is used

by the Federal Trade Commission only when an newly-formed acquiring

corporation is its own ultimate parent.

Moreover, the formation of (redacted) is not reportable. Though (redacted)

is deemed to be $100 million Person, neither of the other contributors

to formation of (redacted) (redacted) and (redacted) is a $10 million Person.

(Redacted) proposed lenders (which are $10 million Persons) will not receive

any stock of (redacted), and thus are not seen to be contributing to its for-

mation within the meaning of the Hart-Scott-Rodino Act.

(Redacted)

cc: (redacted)

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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