Sent: Wednesday, November 14, 2012 7:26 PM
To: Verne, B. Michael
Subject: Warehouse exemption
(Redacted) and I have a question about theapplication of the warehouse exemption to the following transaction.
MyClient, Company A, is engaged in providing storage and ancillary terminallingservices to third party petroleum, chemical, and trading customers in theUnited States and is acquiring Company B's terminalling operations. Company Adoes not trade or market product from its existing assets and will not trade ormarket product from its assets following the completion of the transaction. Thetransaction is being structured as an asset acquisition by Company A of CompanyB's assets including real property, personal property, commercial leases andthird party terminalling agreements. The Purchase Price will be $85 million,plus up to $5 millior.t of contingent earn-out related payments. Company A andCompany B meet the HSR size of the persons tests.
CompanyB stores heavy and light petroleum products on behalf of itself and third partycustomers. Company B receives and distributes its products from either marinevessels or tanker trucks. Company B receives monthly payments from itscustomers in exchange for providing storage and other ancillary terminallingservices including blending, heating, throughput, product blending, loading andunloading. Company B's storage revenue from third party customer accounts isapproximately 80% of contracted revenue with ancillary services accounting forthe remaining 20%. Company A is only acquiring Company B's terminalling assetsand a leased transloading facility and not acquiring Company B's tradingbusiness in this transaction. Therefore, Company A will only use the Company Bassets to provide storage and the other ancillary terminalling services tothird party customers.
CompanyA has agreed to enter into a third party storage and terminalling agreementwith Company B at the closing of the transaction to allow for Company B tocontinue its trading activities at the terminal. Following the closing of thetransaction, the assets acquired from Company B will be used to service thirdparty customer contracts only. Company A will continue to operate these assetsin accordance with how it operates its other assets in the United States whereit does not market or take ownership of petrochemical products and simplyprovides storage and ancillary terminalling services to it's customers.
Webelieve this transaction would qualify for the warehouse exemption, but wantedto verify. Thanks very much for your help.