Question
3/13/84
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Dana Abrahamsen, Esq.
Premerger Notification Office
Bureau of Competition - Room 303
Federal Trade Commission
Washington, D.C. 20580
Dear Mr. Abrahamsen:
On Friday, February 16, 1984 you and I discussed by telephone the question of whether pre-acquisition notification pursuant to the Hart-Scott-Rodino Antitrust Improvements Act, 15 U.S.C. 18a (the Act), would be required with respect to an assets acquisition involving the following facts:
1. The person whose assets will be acquired is engaged in commerce and has total assets of $10,000,000 or more.
2. As a result of the acquisition, the acquiring person will hold assets of the acquired person in excess of $15,000,000.
3. The acquiring person will be a not-yet formed limited partnership and whatever assets (substantially less than $10,000,000) it will have just prior to the closing of the acquisition will have been contributed specifically for the purpose of consummating the acquisition.
4. It is anticipated that a private offering of units of limited partnership interests in the limited partnership will be completed before the acquisition is consummated, but the acquisition will be consummated irrespective of the completion of the offering. Therefore it is possible that a general partner will be the only limited partner in the limited partnership after the acquisition is consummated.
In addition, it was noted that the Act applies to acquisitions involving persons. The term persons is defined in Section 801.1(a)(1) of the Rules. When read with the definition of entity in Section 801.1(a)(2), the term person can include a partnership.
Section 801.11 of the Rules explains the method of determining the assets of a person for purposes of the size-of-the person test. Total assets are all assets as stated on the last regularly prepared balance sheet. Annual net sales are sales as stated on the last regularly prepared annual statement of income and expense.
As discussed and noted above, the acquiring entity in the situation at hand, (redacted), is a newly formed general partnership and has no separate regularly prepared annual statement of income and expense and no regularly prepared balance sheet of its own. Essentially, all that the partnership has or holds is borrowed money. And once the acquisition takes place, there will be less than $10 million left over. Although the partners may have personal assets of their own, subsection (d) of Section 801.11 provides generally that no assets of any natural person shall be included in determining the total assets of a person.
The assets of the partners should not be included for purposes of determining the size of the partnership.
On the basis of the foregoing comments and observations, you concluded that the transaction described above fails to meet the size-of-the-person test for Section 7A(a)(2) and as such is not reportable under the Act and Rules.
During our telephone conversation, you indicated that you would be willing to advise me orally as to whether I have accurately stated the substance of our conversation. I would appreciate it if you could do so as soon as possible. We appreciate your prompt attention to this important matter.
Sincerely yours,
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