Question
(redacted)
August 19, 1986
Patrick Sharpe. Esq.
Federal Trade Commission
Premerger Notification Office
Bureau of Competition
Room 301
Washington, D.C. 20580
Dear Mr. Sharpe:
This will confirm your telephonic advice today that the following transaction satisfies the minimum value exemption and is not reportable.
A. a natural person, is the u.p.e. of B, a solvent corporation the majority of whose stock A holds. Bs sales and assets do not exceed $25 million.
C is a corporation that satisfies the size of person test. C proposes to purchase all of the stock of B for an aggregate purchase price that exceeds $14 million but does not exceed $15 million.
A has loaned B money pursuant to Bs notes. The aggregate balance B owes A is now approximately $1 million. B is current in its loan payments to A, and there is little question but that B would be capable of paying off the loan over time in accordance with its terms. However, because A will no longer control B once C acquires B, A would prefer that his loan to B be paid off at or prior to closing. Thus, A simply wants the loan payment to be accelerated in view of the fact that A will not control B after C purchases B.
In order to effectuate As intentions, the parties are considering any of the four methods:
1) prior to closing, B would repay the loan to A from its cash flow; or
2) prior to closing, B secures a loan from a third party, the proceeds of which are used to relieve B debt to A: or
3) C arranges the third party loan to B and guarantees the loan, the proceeds of which are used to pay off A; or
4) C makes the loan to B so that B may retire its debt to A.
You advised that under these circumstances the means by which As loan to B is retired is a business matter between the parties; that the value of the transaction is the amount C pays for Bs stock; and that Cs acquisition of Bs stock would entail the assumption of Bs liabilities (including the debt to A) anyway. We concur in your conclusion that any of the foregoing ways of accelerating payment of As loan to B do not count towards determining the value of the transaction. The result is that the minimum value exemption applies because the purchase price for the stock of B is not more than $15 million and B has less than $25 million in sales and assets.
Thank you for your prompt assistance.
Sincerely,
(redacted)
(redacted)