0605013 Informal Interpretation

Verne, B. Michael go=. 	9-
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Verne, B. Michael
ArticleIExemption on Formation of LLC
Mr. Verne: Having reread the Article and parts of 802, 1 believe that I
now understand. Below is an example of a transaction that I believe
would be exempt under 802.4. Please let me know if I am correct.
Thanks.
Corporation X and Corporation Y want to form a joint venture that will
be a limited liability company ("LLC"). Corporation X will contribute
certain stock and assets to LLC in exchange for a 75% interest in LLC.
The value of the stock and assets contributed and the value of the LLC
interest are each assumed to be $180 million. Corporation Y will
contribute certain stock and assets to LLC in exchange for a 25%
interest in LLC. The value of the stock and assets contributed and the
value of the LLC interest are each assumed to be $60 million. It is
also assumed that the size-of-the-parties test has been satisfied. In
determining whether or not the transaction is exempt under 802.4, the
stock and assets are excluded pursuant to 802.30. In addition, the
contribution of Corporation Y includes a minority interest in a foreign
corporation the acquisition of which would be exempt under 802.51[the
minority interest would also be exempt under the last sentence of
802.4(a)], the value of which is approximately $25 million, and foreign
assets the acquisition of which would be exempt under 802.50, the value
of which is approximately $5 million. Accordingly, the value of the
transaction for purposes of the size-of-the-transactiontest is $30
million ($60 million contributed by Corporation Y, less $25 million for
the minority interest in the foreign corporation and less $5 million for
the foreign assets), and therefore the transaction is not reportable.
-----Original Message-----
From: Verne, 5. Michael [mailto:MVERNE@ftc.gov]
Sent: Mondav. Mav 08. 2006 7:24 AM
Y
The size-of-transactionis the value of the non-corporate interest
received, not less anything. When analyzing the possibility of the
acquisition being exempt under Section 802.4, you can exclude the value
of what you are contributing to the formation from the $56.7 MM
limitation on non-exempt assets in that exemption pursuant to Section
802.30(c). Give me a call if you want to discuss.
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To: Verne, B . ~ i c h a e l