Question
July 1, 1985
VIA FEDERAL EXPRESS
Andrew Scanlon, Esq.
Department of Justice [sic]
Bureau of Competition
Room 303
Sixth Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mr. Scanlon:
On behalf of our client, this firm requests the opinion of the Premerger Notification Office as to a prospective transaction. Specifically, , a desires to acquire certain tangible and intangible assets of , a wholly-owned subsidiary of that is .
As detailed in the corporate report submitted herewith, is engaged, among other things, in the breeding and production of monogerm sugar beet seed. Taking into account its subsidiaries and related companies, has total fixed assets of approx. 1 billion equivalent to approximately 100 million dollars. Among the family of companies, it should be noted, is a U.S. corporation known as which is engaged in the business of biotechnological development, and two U.S. wholly-owned subsidiaries, both of which are presently inactive.
On or about , with the United States for the Norther District of Texas, Dallas Division . Under Chapter 11 of the , has continued in the management and operation of its business as a debtor-in-possession.
Having negotiated with over a period of several months, has reached an agreement pursuant to which it would acquire certain assets and assume certain obligations of for a sum of not to exceed . The assets to be purchased are the following:
1) inventories at closing. 2) right and obligation to purchase by , in comprining approximately acres of production. 3) interest in any patents, trademarks, copyrights or know-how relating to the cultivation and production of . 4) All of tangible assets and properties, including fixtures and equipment located at its research and processing facilities in . 5) The know-how of and its employees as it relates to the business. 6) Research materials and technical data relating to the cultivation and production of by . 7) All of rights and obligations under three contracts, namely with , and .
The acquisition would, as set forth above, be limited to these assets and would not include securities, voting or otherwise, or any cash on hand.
Of the potential total purchase price of only thereof would be payable in cash at a closing to be held once approval is obtained. Such cash payment by would be in consideratio of items 1, 3, 4, 5 and 6 listed above. Payment of the remaining $1,600,000 would be contingent on the sale of to , and to growers in designated areas over a period of three years.
The contingent portion of the purchase price ($1,600,000) may be detailed as follows. Pursuant to the purchase agreement, will assume the obligations of under certain agreements to provide to principally by . Of the initial sales by and Monitor [sic] within the scope of the asset purchase agreement, will remit to the first $600,000 received from these companies.
The remaining $1,000,000 of the contingent portion of the purchase price is tied to future sales by to growers in designated areas in the proximity of refining facilities. In that these facilities are no longer in operation and are for sale, it is not certain that the in the designated areas will continue to buy . But in the event tha the do continue to buy , has agreed to pay a per pound royalty to . The royalty payment, which cannot exceed a total of $1,000,000, will be calculated on sales to the growers in 1986, 1987, and 1988.
Separate and apart from the potential purchase price of $2,883,000, will assume, in accordance with item 2 above, the purchase obligations of under a contract with , . This obligation, has been advised, will total approximately $1,200,000.
Finally, has agreed to assume the obligations of under an agreement with Inc. This entail the payment of a royalty on future sales of certain purchased from under the agreement. Under prior sales, we believe the royalty payment to will be minimal.
It is the understanding of this firm that the transaction, as set forth herein, is not within the scope of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 so as to require filing of a premerger notification statement. While is an acquiring person with total assets of more than $100 million and is an acquired person with assets of more than $10 million so as to satisfy the size-of-person test, the transaction is not large enough to trigger filing. In particular, would immediately acquire assets with a fair market value of only . Such amount, when weighted against total corporate assets of , does not constitute the requisite 15% of .
submits this letter together with the corporate report of and a copy of the asset purchase agreement in an effort to comply with the spirit of the Hart-Scott-Rodino Antitrust Improvements Act. While it does not believe that the contemplated transaction rises to the level necessary to trigger premerger notification, it submits this letter in a good faith effort to open inquiry in the transaction.
If you need additional information please contact me.
Yours truly,
Enclosure