Question
(redacted)
August 11, 1988
Federal Trade Commission
6th & Pennsylvania Avenue, NW
Room 303
Washington, D.C. 20580
ATTENTION: Richard smith
Dear Mr. Smith:
We are writing to request a determination that the following acquisitions are not subject to the notification requirements of Section 7A of the Clayton Act (hereinafter The Act).
FACTS
*no stock involved?
We represent (redacted) (hereinafter (redacted) a Massachusetts Corporation which is engaged in supermarket business with net sales in excess of $100,000,000 (redacted) intends to purchase in excess of 15 percent of the assets (redacted) (hereinafter (redacted) and (redacted) (hereinafter (redacted) both Connecticut Corporations. Such assets include leasehold interests, leasehold improvements, equipment, fixtures, motor vehicles, and inventory. Both entities are engaged in the supermarket business.
The voting stock of (redacted) is owned 50 percent each by two individual shareholders. The voting stock of (redacted) held by 11 different individual shareholders, two of whom are the owners of the voting stock of (redacted) No Shareholder (taking into account the holdings of spouse and minor children) own 50 percent or more of the voting stock of (redacted) Neither corporation owns 50 percent or more of the stock of any other corporation.
**annual?
**annual net sales?
The total value of the assets of (redacted) is approximately $3,000,000, and its net sales are less than $25,000,000. The total value of the assets (redacted) are approximately $5,000.000, and its assets exceed $25,000,000.
ISSUE I
In determining whether the acquisitions described above are subject to the notification requirements of Section 7A of the Act, are (redacted) and (redacted) considered the same person?
CONCLUSION
No.
THE LAW
Under Regulation Section 801.1(a), the term person includes an ultimate parent entity and all entities which it controls directly or indirectly and an ultimate parent entity is defined as an entity which is not controlled by any other entity. Section 801.1 (b) defines control as holding 50 percent or more of the outstanding voting securities of an issuer.
DISCUSSION
Since the ultimate parent entity of (redacted) is its two individual shareholders and the ultimate parent entity (redacted) the two entities are not under common control and are not deemed the same person within the meaning of the Act.
ISSUE II
Is either acquisition subject to the notification requirement of Section 7A.
CONCLUSION
No.
THE LAW
Section 7A(a) provides that:
No person shall acquire directly or indirectly, any voting securities or
assets of any other person, unless both person . . . file notification . . . if
(1)the acquiring person, or the person whose voting securities or assets are
being acquired, is engaged in commerce of in any activity affecting
commerce; . . .
*(A) A side has 100 MM or more in net sales or total assets. B side has 10 MM or more in net sales or total assets and is engaged in manufacturing
(2)(B) any voting securities or assets of a person not engaged in manufacturing
which has total assets of $10,000,000 or more are being acquired by any
person which has total assets of $10,000,000 or more are being acquired
By any person which has total assets or annual net sales of $100,000,000
or more; or
(C)any voting securities or assets of a person with annual net sales or total
Assets of $100,000,000 or more are being acquired by any person with
Total assets or annual net sales of $10,000,000 or more; and
(3) as the result of such acquisition, the acquiring person would hold
(A)15 per centum or more of the voting securities or assets of the acquired
Person, or
(B)an aggregate total amount of the voting securities and assets of the
Acquired person in excess of $15,000,000.
Regulation, Section 802.20, provides that:
[a]n acquisition which would be subject to the requirements of [A}ct
And which satisfies [S]ection 7A(a)(3)(A), but which does not
satisfy [S]ection 7A(a)(3)(B) shall be exempt from the requirements
of the [A]ct if as a result of the acquisition the acquiring person would
Not hold:
(a)assets of the acquired person valued at more than $15 million; or
*What is the consideration being paid? Value of assets to be acquired is fair market value (not book value) or if greater than fair market value, acquisition price . Acquiring person determines.
(b)voting securities which confer control of an issuer which, together with
All entities which it controls, has annual net sales or total assets of $25
Million or more.
DISCUSSION
(Redacted)
(Redacted) engaged in an activity affecting commerce; the assets of (redacted) including the assets of its ultimate parent entities, its two shareholders, exceeds $10,000,000; annual net sales of (redacted) $100,000,000; and as a result of this acquisition, (redacted) would hold 15 percent or more of the assets of (redacted) would not hold an aggregate total amount of the voting securities and assets of (redacted)
Were it not for the exemption under Regulation Section 802.20, this transaction would be subject to the notification requirements. However, since the acquisition satisfies the requirements of Section 7A(a)(3)(A) but not the requirements of Section 7A(a)(3)(B) and as a result of the acquisition (redacted) would not hold assets of (redacted) valued at more than $15, 000,000 or voting securities of (redacted) the transaction is exempt.
DISCUSSION
(Redacted)
(Redacted) is engaged in an activity affecting commerce; since (redacted) is the ultimate parent entity and its assets [note 11] do not equal $10,000,000 and its net sales do not equal $100,000,000, it does not appear to meet the requirements of Section 7A(a)(B) or (C); as a result of the acquisition, (redacted) would hold 15 percent or more of the assets of (redacted) but would not hold an aggregate total amount of the voting securities and assets (redacted) in excess of $15,000,000.
Assuming that this acquisition does in fact meet the notification requirements under the statute, it would nevertheless be exempt under Regulation Section 802(2). Thus, the acquisition satisfies Section 7A(a)(3)(A) of the act but does not satisfy Section 7A(a)(3)(B), and as a result of the acquisition (redacted) would not hold assets of (redacted) values at more than $15, 000,000, nor is (redacted) acquiring voting securities of (redacted)
Based on the above, we request a determination, at your earliest convenience, that neither the (redacted) acquisition nor the (redacted) acquisition are subject to the notification requirements of Section 7A of the Clayton Act.
Thank you for your cooperation. We also want to express our appreciation for your telephone assistance in analyzing the statute.
Sincerely,
(Redacted)
(Redacted)