8303004 Informal Interpretation

Andrew Scanlon


March 10, 1983



Mr. Andrew Scanlon
Premerger Notification Office
Bureau of Competition
Room 301
Federal Trade Commission
Washington, D.C. 20580

Re:    Confirmation of Prior Discussion

Dear Mr. Scanlon:

The purpose of this letter is to confirm the informal

interpretation you gave to me by telephone pursuant to FTC

Rule 803.30 with respect to the application of the premerger

notification rules of the Hart-Scott-Rodino Act to the

series of transaction described below.

Fact. In 1977 A and B, both of which are corporations

with sales and assets in excess of $100 million, organized X

as a partnership. The partnership form was selected for tax

reasons, and it was intended that X would engage in the

development of a number of new products. A and B have each

owned a 50% interest in X from the time of its formation to

the present.

The parties are now considering whether to change the

form of the organization of X, in tow stages, from a partner-

ship to a corporation, but there is no intention to change

the essential fact that A and B will each continue to own

50% of X.

In the first stage, A and B would each organize wholly

owned subsidiaries (referred to hereafter as Sub-A and Sub-

B, respectively). Thereafter, A and B would each transfer

their respective interest in X to their new wholly owned

subsidiaries. Thus, at the conclusion of these steps, A

would own 100% of the stock of Sub-A, B would own 100% of

the stock of Sub-B, and Sub-A and Sub-B would each own a 50%

partnership interest in X.

In the second stage, some time after the above steps

are consummated, it is proposed that Sub-A merge into Sub-B.

The merged company would change its corporate name from Sub-

B to X, Inc. at the moment the merger is effective. X, Inc.

would, of course, by virtue of the merger, be the owner of

the entire interest in partnership X. A would exchange its

100% stock interest in Sub-A for 50% of the stock of X, Inc.

(formerly Sub-B). Thus, A and B would each continue to own

50% of the venture after the merger. Following the merger

described above, the X partnership would be dissolved and

its assets transferred to X, Inc.

At the conclusion of our discussion, you advised me

that each of the steps described above would be exempt from

notification pursuant to FTC Rule 802.30. This is because

the transaction does not result in a change of ownership of

any interest in X venture: both now and at all times in the

future A and B (each persons as defined in Rule 801.1(a))

will own 50% of the venture, as in the past.

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