No written comments
Mr. Dana Abrahamsen
Federal Trade Commission
Sixth Street & Pennsylvania Avenue, N.W.
Washington, DC 20580
Confirming our conversation of today, the reporting and waiting requirements of Section 7A of the Clayton Act do not apply to the following leveraged buy-out transaction.
A. THE ACQUISITION
A is an ultimate parent entity with sales or assets exceeding $100 million. A will sell substantially all of the assets of an operating division and a subsidiary to a new corporation B, for aggregate consideration exceeding $15 million. More than 50% of the voting stock of B will be held by C, a limited partnership. C will therefore be Bs ultimate parent entity for purposes of determining where the Acquiring Person holds $10 million or more in sales or assets. One or more of the partners in C has sales or assets of more than $10 million. Because, however, a partnership is always deemed to be its own ultimate parent, the holdings of its partners need not be considered.
Cs most regularly prepared balance sheet shows total assets of $5.8 million, consisting principally of convertible preferred stock in two corporations, other minority stock interests, and cash or cash equivalents. In addition to these assets, C has the discretionary contractual right to call on its limited partners to contribute up to $32 million in additional capital. In accordance with generally accepted accounting principles, Cs accountants (an independent outside, big eight accounting firm) have placed no value in this contractual right to calculating the value of Cs assets. For purposes of Section 7A of the Clayton Act, C is deemed to be smaller than a $10 million person, the acquisition is not reportable.
B. THE FORMATION OF B
The formation of B does not satisfy the requirements of Section 801.40, and is therefore not reportable. Neither C or any other contributor to B has annual net sales or total assets of $10 million or more.