Question
(redacted)
Andrew Scanlon
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580
February 11,1987
Dear Mr. Scanlon:
We spoke Yesterday with Andrew Scanlon regarding an acquisition transaction entered into by one of our clients (redacted) recently acquired approximately 97% of the voting common stock of (redacted). at the suggestion of Mr. Scanlon, we are writing to advise you of the transaction in the hope that you will concur with our conclusion that a filing under the Hart-Scott-Rodino Antitrust Improvements Act of the 1976 (H-S-R) is not required.
(redacted) primary business is the manufacture of footwear for work, sport and leisure. Its net sales in fiscal 1986 were approximately $109,000,000. (redacted) principal business is the tanning of cattlehides into leather for shoe and boot uppers. For the fiscal year ended June 30, 1986, (redacted) total net sales were approximately $48,000,000.
In (redacted) began having financial problems, and by the end of its last fiscal year (June 30 1986), it had a negative net worth of over $3,000,000. During the period from 1982 through the end of 1986 (redacted) request, advanced substantial sums to (redacted) effort to assist it through its financial difficulties. At December 30, 1986, immediately before the acquisition transaction in question, (redacted) or its subsidiaries approximately had guaranteed $2,500,000, a subsidiary of (redacted) owned and leased to (redacted) one of (redacted) manufacturing plants.
On December 31, 1986, having been advised by (redacted) bank lender of the banks intent to call its loan, (redacted) in order to protect its already substantial investment in (redacted) did the following:
I. It purchased (redacted) shares of Common Stock of (redacted) (representing approximately 97% of the outstanding Common Stock) from (redacted) at a per share price of $1.0301 for an aggregate purchase price of $1,000,000. The purchase price was paid by cancellation of (redacted) obligation to repay an advance in that amount under Production Agreement dated June 18, 1982 between (redacted).
II. It purchased (redacted) existing bank loan in the face amount of approximately $8,000,000 from the bank at a substantial discount.
Given the size and nature of the acquisition transaction, H-S-R was not considered. In preparing documents for a clean-up merger, however, the question of H-S-Rs applicability was raised. We, therefore, called the Federal Trade Commission and spoke to Mr. Scanlon. While obviously unable to give us a definitive answer on the telephone, Mr. Scanlon suggested that the acquisition might be exempt under 802.63(a). Based on our review of 802.63(a), we believe the acquisition described in this letter should be exempt from H-S-R filing as a bona fide debt workout.
We have advised the company not to proceed with the proposed clean-up merger until we have received confirmation that a H-S-R filing is not required. We would, therefore, appreciate it if you would promptly advise us if you disagree with our conclusion that a filing is not required in the circumstances described in this letter. Obviously, if you disagree, we will promptly prepare and file the necessary documents.
Please call me (redacted) if you have any questions. Thank you for your assistance.
Very truly yours.
cc: (redacted)