0612011 Informal Interpretation

us-ftc-hsr-informal-interpretations-4ef82461d1363d74c518b5635bd0b1060612011 Informal InterpretationGuidance

Open source
Date
Rule
801.40
Staff
Michael Verne
Response/Comments
Scenario 1 - I agree this not reportable Scenario 2 - The commitment to contribute the $80 MM in land does go to the size of the jv, so you are correct that the size of person test is satisfied. However, the only assets of the jv are the land and $ 4 MM in cash, so presumably A and B's 50% interests in the jv would be valued at $42 MM each. So the size of transaction test is not satisfied and the formation is non-reportable. Scenario 3 - I agree that the formation is not reportable. The later contribution of land could be a reportable acquisition depending on how the deal is structured, but if it's just raw land, it's probably exempt as unproductive real property.

Question

From:(redacted)

Sent:Monday, December 18, 2006 11:13 AM

To:Verne, B. Michael

Subject:Joint Venture HSR filing notification

Michael:

Ihave never had to confront the question of when the formation of a JV requiresa filing, and would appreciate some guidance with respect to the following:

Background

CompanyA and Company B will form a 50/50 joint venture (JV). Both Company A andCompany B have sales or assets in excess of $113 million.

Scenario1: At the time the JV is formed, Company A will contribute $2 million in assetsand Company B will contribute $2 million. Thus, the JV will have total assetsof $4 million.

Conclusion:The formation of this JV is not reportable.

Scenario2: At the time the JV is formed, Company A will contribute $2 million in assetsand Company B will contribute $2 million. In addition, Company A and Company Bagree at the time the JV is formed to jointly purchase property worth $80million and contribute that property, once purchased, to the JV. Conclusion:Because Company A and Company B agreed at the time the JV was formed tocontribute assets in excess of $11.3 million, and the JV (acquired person) hadassets in excess of $56.7 million, the JV is reportable at the time it isformed. (FMV of the land is in excess of $56.7 million, so the value of thetransaction is in excess of $56.7 million)

Scenario3: At the time the JV is formed, Company A will contribute $2 million in assetsand Company B will contribute $2 million. The purpose of the JV is to explorewhether Company A and Company B can obtain approval for a building project.Later, the JV obtains approval and Company A and Company B contribute land tothe JV worth $80 million. The land is to be used for the building project.

Conclusion:This transaction is not reportable at the time it is formed because the JV didnot have sales or assets in excess of $11.3 million; and at the time offormation, the JV did not have a FMV in excess of $56.7 million.



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