Â鶹´«Ã½

(redacted)

March 4, 1983

Mr. Andrew Scanlon
Compliance Specialist
Premerger Notification Office, Room 303
Â鶹´«Ã½ Trade Commission
7th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580

Dear Mr. Scanlon:

As we discussed, I an writing to confirm our

telephone conversations of February 25, 1983, in which

you provided an informal opinion regarding the applica-

bility of the premerger notification provisions of the

Hart-Scott-Rodino Antitrust Improvements Act of 1976

(the Act) to a contemplated leveraged buy-out of sub-

stantially all of the assets of a subsidiary corporation

by a new corporation formed for the purpose.

More specifically, the transaction I described

would involve the following: Company A is a diversified

holding company with several subsidiaries and more than

$100 million in assets and annual net sales. Certain

officers of Company B, a wholly-owned subsidiary of Com-

pany A, have proposed to purchase substantially all the

assets of Company B for a purchase price, consisting of

cash and notes, of $15 million. To effect the purchase,

the officers would form Company C, which would be the

acquiring entity. Company C would be nominally capital-

ized and would obtain a commitment from a lending bank

permitting the borrowing of approximately $12 million,

which would be used for the cash portion of the purchase

price. Simultaneously with the closing of the purchase

by Company C of the assets of Company B, Company C would

(a) effect the borrowing under the loan commitment,

(b) immediately pay over the amount borrowed to Company A

in partial payment of the purchase price and (c) issue its

notes to Company A in payment of the balance of the pur-

chase price.

We note that prior to the consummation of the

transaction, Company C would be without assets, except for

its nominal capitalization and except to the extent that

its contractual rights under the purchase agreement and

loan commitment may be deemed assets. In addition, Com-

pany C would be wholly owned by the officers mentioned

above and would not be an entity within any person meeting

the jurisdictional requirement of the Act.

As noted above, at the time of closing Company C

would receive, and immediately deliver to Company A, cash

proceeds of its borrowing under the loan commitment in an

amount greater than the jurisdictional amount set forth in

Section 7A (a) (2) of the Act. However, it is our under-

standing that the Commission staff has determined that

where the only significant assets of an acquiring company

are the cash proceeds of an loan intended to finance the

acquisition, which proceed are received by and passed

through the acquiring company simultaneously with the

acquisition, the transaction is not likely to be of anti-

trust significance and the acquiring party will not be

deemed to meet the size-of-the-parties test of Section

7A(a)(2) of the Act. Of course, following the consummation

of the transaction, any further acquisition involving the

acquiring parties (none is presently contemplated) would

have to be independently evaluated to determine the applic-

cability of the Act.

Under the facts outline above and on the basis

of the foregoing analysis, you advised that the proposed

transaction may be consummated without complying with the

notification and waiting requirements of the Act.

We request that you notify us with two weeks

of the date of this letter if the operative facts out-

lined above are inconsistent, in any material respect,

with your recollection of our February 25 telephone

discussions or if you disagree with the conclusion

arrived at or its underlying analysis.

Thank you again for your prompt assistance in

this matter.