1606001 Informal Interpretation

From: 	Storm, Evan
To:
Subject: 	RE: Question re 801.10
Date: 	Thursday, June 02, 2016 12:16:00 PM
Attachments: 	image001.jpg
Since B’s capital expenditures were already made prior to the current transaction, A’s
reimbursement payment to B cannot be excluded from the purchase price.
Regards
Evan
From:
Sent: Tuesday, May 31, 2016 12:55 PM
To: Storm, Evan
Subject: RE: Question re 801.10
Hi Evan,
Thanks again for your guidance on the fact pattern below. I have one more question on this issue.
As part of the acquisition of the 50% interest in C, A will also reimburse B for 50% of certain of C’s
capital expenditures already made by B. Informal interpretation 1209011 suggests that we could
exclude this reimbursement from the size of transaction, but it would be great if you could confirm.
Thanks,
From: Storm, Evan [mailto:estorm@ftc.gov]
Sent: Tuesday, May 24, 2016 10:13 AM
To:
Subject: RE: Question re 801.10

We agree that you can exclude the future capital expenditure payments.
Evan
Evan Storm
Attorney
Premerger Notification Office
Federal Trade Commission
(202) 326-3193
estorm@ftc.gov
HSR filing questions? Check the PNO Blog and HSR Tips.
From:
Sent: Monday, May 23, 2016 1:01 PM
To: Walsh, Kathryn E.; Whitehead, Nora
Subject: Question re 801.10
Hi Kate and Nora,
I would appreciate your guidance on a valuation question. Here are the facts:
· 	A would acquire from B a 50% interest in C, an LLC. Currently B holds 100% of C. Both A
and B would control C after the acquisition.
· 	At close, A would pay B cash consideration that would be below the current $78.2 million
size of transaction threshold.
· 	A would also agree to fund 50% of C’s future capital spending projects up to $100 million. B
would fund the other 50% of C’s capital spending projects.
· 	The transaction would meet the size of person test.
Would we include the future capital spending payments by B when valuing the size of transaction?
Interpretation No. 50 in the PNPM (5th Ed.) states that future cash contributions should be excluded
from the size of transaction. However, that interpretation is provided in the “context of a joint
venture formation.” Here, we are not forming a new JV entity.
Informal interpretation 1209011 also suggests that we would exclude the future capital expenditure
payments from the size of transaction, but that interpretation was in the specific context of the sale
of 100% of target. See https://www.ftc.gov/enforcement/premerger-notification-program/informal-
interpretations/1209011
Can we apply the same principles discussed in these interpretations to exclude the future capital
expenditure payments here?
Thanks very much for your help.
Best,