Question
(redacted)
December 2, 1983
FEDERAL EXPRESS
Patrick Sharpe, Esq.
FEDERAL TRADE COMMISSION
Pennsylvania Avenue At
6th Street, N.W., Room 301
Washington, D.C. 20580
Dear Mr. Sharpe:
As suggested by you in our recent telephone conversations, I am outlining the proposed transaction as to which there was a question as to whether notification was required under Hart-Scott-Rodino.
A Company (A) and B Corporation (B) each hold less than 50% of the voting securities issued by X Corporation (X). X is engaged in manufacturing and has annual net sales in excess of $700 million. B has approximately 10 shareholders.
A and B have recently caused H Corporation (H) to be formed for the purpose of acquiring voting securities of X. H is intended to function solely as a holding company. At the present time, H has no assets and has issued no stock.
A, B an Bs shareholders have agreed that:
(1) A will sell certain of its operating assets valued at less than $1.5 million to X for voting securities of X;
(2) A will exchange all of its holdings of X for voting securities to be issued by H;
(3) B will sell certain of its operating assets valued at less than $5 million to X for dollars;
(4) B will sell certain of its assets valued at less than $3 million to H for dollars and voting securities to be issued by H;
(5) Bs shareholders will exchange their B stock for dollars and voting securities to be issued by H; and
(6) H will transfer the assets acquired from B to X in exchange for voting securities of X.
All of the above transactions will take place at or about the same time.
The X voting securities acquired and held by H will have a book value of approximately $13 million. As a result of these transactions and Xs redemption, at or about the time of the transactions, of some of its voting securities held by shareholders other than A, B and H, it is expected that H will hold voting securities of X in excess of 80% of the then total issued and outstanding stock of X. No shareholder of H will hold 50% or more of the voting securities of H.
It is expected that Xs annual sales in the future will approximate $1 billion and account for about 3% of the market.
In accordance with our understanding, if it is determined that notification is required, or that the proposed transaction is objectionable on substantive grounds, you will advise me within a day or two.
Very truly yours,
(Redacted)
(Redacted)