8412002 Informal Interpretation

801.40; 802.20
Wayne Kaplan

Comments in body of letter only (See below)



December 4, 1984

Wayne Kaplan, Esq.
Federal Trade Commission
Bureau of Competition
Sixth & Pennsylvania Avenue, N.W.
Washington, D.C. 20580

Dear Mr. Kaplan:

This letter is in response to our recent telephone conversation with respect to my letter to you dated November 13, 1984. As requested, this letter supersedes such letter of November 13, 1984.

(redacted) an investment banking firm (redacted) formed by (redacted) for purposes of the transaction, and certain investors (the Shareholders) are proposing to form a new corporation (New Co.) which will acquire the (redacted) business of the (redacted) of companies ((redacted) in transactions (the Acquisitions)* to be consummated shortly after the formation of New Co. (redacted) is owned 50% by (redacted) and 50% by (redacted). Present plans are to close from December 17 to December 19, 1984. There will initially be five or more Shareholders, no one of which will acquire 50% or more or in excess of $15,000,000 of the voting securities of New Co. Two of such Shareholders will acquire their shares for a total of approximately six million dollars which will be paid in equal installments , [sic] without interest, over a seven to eight year period, and such installment obligations may be evidenced by a note or notes delivered by such Shareholders to New Co. The other Shareholders will acquire their shares for a total of approximately twelve million dollars. Each initial New Co. Shareholder is a separate person as that term is defined in Section 801.1(a)(1) of the rules promulgated by the Federal Trade Commission pursuant to 7A(d) of the Clayton Act (the Rules). No initial New Co. Shareholder will have the power to designate a majority of the directors of New Co. or have any arrangement, contractual or otherwise, with one or more other shareholders which would provide that power.

Staff comment: * error (with line directed to and circling the s in Acquisitions)

After its formation, New Co. will enter into a contract with several sellers** who are members of the (redacted) to acquire the music publishing business of the (redacted) consisting of the assets of a United States corporation (including assets of subsidiary corporations to be acquired by merger) for $35,000,000 or less and the voting securities of various non-United States issuers (the non-U.S. securities) for $65,000,000 or more. The total purchase price will be $1000,000,000 or less. Accordingly, the assets of such United States corporation are valued at $35,000,000 or less and the non-U.S. securities are valued, in the aggregate, at the difference between $100,000,000 and the value of such United States corporation. The foreign issuers whose securities are being acquired to not in the aggregate hold assets located in the United States having a book value of $15 million or more or have aggregate sales in or into the United States of $25 million or more in their most recent fiscal year.

Staff Comments: ** sellers circled. error -2- (redacted) [indecipherable] else is covered

New Co. will obtain approximately $70,000,000 to $80,000,000 of the $100,000,000 it will require for the Acquisitions by borrowing funds (the Loan) from one or more banks (the Bank). If secured at all, the Loan will be secured only by the securities and assets being acquired . [sic] The Loan will not be guaranteed. New Co. may issue either non-voting securities or convertible securities to the Bank in part consideration for the granting of the Loan. Any such securities, if convertible into voting securities at all, would not be convertible for a period of at least six months.

New Co. will also obtain approximately $20,000,000 by borrowing funds (Subordinated Debt) from certain of the Shareholders. Such shareholders will acquire debentures evidencing the Subordinated Debt, and the Subordinated Debt will be subordinated to the Loan. One of the Shareholders will purchase the Subordinated Debt for a Series of payments in equal installments over eight years. The other purchasers of Subordinated Debt will acquire the debentures for cash.

On the basis of such facts, we respectfully request your confirmation of the following conclusions:

1.Assuming that New Co. is subject to Section 801.40(c) of the Rules, the

Bank will not be deemed a contributor to the formation of the joint venture or other corporation within the meaning of Section 801.40(c) of the Rules by reason of granting the Loan to New Co. and/or acquiring New Co.s non-voting Securities.

2.Assuming that the formation of New Co. and the acquisition of its voting

securities by a New Co. Shareholder meet the criteria of Section 801.40(b) of the Rules

and Section 7A(a)(3)(A) of the Clayton Act, respectively, such acquisition of voting securities by a New Co. Shareholder will be exempt from the requirements of the Clayton Act pursuant to Section 802.20 of the Rules and the Act if, as a result of the acquisition, such New Co. Shareholder does not hold assets*** of New Co. valued at more than $15,000,000 or 50% or more of the voting securities of New Co.****

Staff Comment: *** or voting securities **** error

4. [sic]For the purpose of determining the total assets of New Co. at the time of the Acquisitions, if New Co. is a newly-formed corporation, has no regularly prepared financial statements, is not an entity within any other person, as those terms are defined in the rules, and acquires the assets and voting securities which are the subject of the Acquisitions***** for cash or cash equivalents, then the amount of cash and cash equivalents used to acquire such assets and voting securities will be excluded from the computation of the total assets of New Co. at the time of the Acquisitions. Thus, the only assets of New Co. which will be included in the computation of total assets and the subsequent determination of the size of New Co. as a person, are any assets of New Co., other than the cash and cash equivalents used in connection with the Acquisitions.

Staff comment: ***** error (with line directed to and circling the s in Acquisitions)

We will assume you concur with the foregoing unless you notify us to the contrary in writing by December 12, 1984. Based upon the foregoing, we will presume that no filing under the Hart-Scott-Rodino Antitrust Improvements Act will be necessary in connection with the transactions described herein on the facts presented.

Thank you for your assistance in this matter.

Very truly yours,


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