Question
(redacted)
February 25, 1986
Addie L. Williams, Esquire
Compliance Specialist
Premerger Notification Office
Federal Trade Commission
6thand Pennsylvania Avenue
Room 301
Washington, D.C. 20580
Dear Ms. Williams:
This letter will confirm our discussion about Hart-Scott-Rodino premerger notification requirements to supplement my letter to you of February 6, 1986. In a case I presented to you, a company which in total had assets of over $100,000,000 would divest one of its divisions. The equity purchaser is a newly formed company which would invest less than $1,000,000 of its own funds to acquire the division. The new company is its own parent. The rest of the purchase price would be provided through a loan of over $20,000,000 made to the acquiring equity purchasers. All of this loan would be used as payment to the divesting company for the acquired division. Under these circumstances, we believe that no Hart-Scott-Rodino premerger notification to the Federal government would be necessary.
I was also directed to the September 24, 1985 Federal Register which contains a proposed amendment to 16 CFR Section 801.11 which states:
The Commission proposes to amend 801.11 to codify a longstanding
informal position of the staff that a newly-formed entity generally should not
include funds used to make an acquisition in determining its size. Under this
proposed rule, if an entitys only assets are cash that will be used to make the
acquisition and securities of the entity it is acquiring, it generally will not have
to file for that acquisition because the new entity will be deemed too small to meet
acts size-of-person test.
. . .
In advising newly-formed persons of their obligation to prepare balance
sheets, the Commission staff has advised that acquiring persons should not include
as assets cash or loans that will be used to make an acquisition. The Commission
now proposes to adopt this staff position and incorporate it in a new 801.11(e)
which establishes the procedure for calculating the total assets of newly-formed
persons.
I very much appreciate your assistance in this matter.
Sincerely,
(redacted)
(redacted)
STAFF COMMENTS: 2/25/86
Follow-up letter to one of 2/6/86 clarifying facts of non-reportability. Facts confirmed.
A.W.