Question
(redacted)
July 28, 1988
Dear Mr. Kaplan:
Thank you for your phone call in response to my letter of July 26. This letter will confirm our conversation today regarding the reportability of the same transaction, which I had outlined as follows:
A group of investors consisting of individuals in management along with one outside entity have formed a new corporation (redacted) for the purpose of acquiring 100% of the voting securities of Company (a $100 million person). (Redacted) has no 50% shareholder. The acquisition is to be accomplished in two stages. First, (redacted) will make a cash tender offer for company shares which, it can be assumed, will result in (redacted) acquiring control of Company. Sufficient financing has been arranged to allow (redacted) buy the tendered shares. At the second stage. (Redacted) and Company will merge, and any untendered shares will be cashed out. At this point, the surviving entity will borrow funds substantially in excess of those needed to finance the acquisition of company; these amounts will be well in excess of $10 million and will not be borrowed until the closing to the merger.
You explained today that, for purposes of 801.40(c) the full amount of the financing for which agreements have been secured is included in determining the size of (redacted) even though these amounts will not actually be borrowed until after (redacted) assumes control of the Company. Therefore reportability will turn on whether any contributor will hold $15 million in voting securities (redacted) pursuant to 802.20. Assuming that the largest contributor (redacted) will be contributing only about $5 million and that the contributors will not guarantee loans to (redacted) the formation of (redacted) would not be reportable.
Moreover, the acquisition of company (redacted) is not reportable because, pursuant to 801.11(e), (redacted) will not have $10 million in assets at the time of its acquisition of Company.
I trust you will let me know if this is not consistent with our discussion. I appreciate your assistance.
Sincerely,
(Redacted)
Wayne Kaplan
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
6th & Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580
VIA FEDERAL EXPRESS