18030002 Informal Interpretation

Date

March 1, 2018

Tags:

Competition

Rule

802.63

Staff

Timothy Carson

Response/Comments

Rule 802.63 does not exempt this transaction.

Original Image (107.26 KB)

Question

From: [Redacted]

Sent: Thursday, March 1, 2018 10:41:13 AM (UTC-05:00) Eastern Time (US & Canada)

To: [Redacted]

Cc: [Redacted]

Subject: RE: Question re Debt Payoff

[Redacted]

Rule 802.63 does not exempt this transaction.

Regards,

Timothy (Ty) Carson

From: [Redacted]

Sent: Wednesday, February 28, 2018 4:07:13 PM (UTC-05:00) Eastern Time (US & Canada)

To: [Redacted]

Subject: Question re Debt Payoff

Acquiring person [A] is planning to acquire target [T], a subsidiary of acquired person [B], for $100 million. Included as part of the consideration for the transaction, [A] will pay off (or forgive) $20 million in debt owed to it by [S], another subsidiary of [B] (but not the target). The debt represents the receipt of goods and/or services received by [S] from [A] that occurred in the ordinary course of business.

Within the past year, the PNO has clarified its position on debt payoffs that the amount of 3rd party debt must be in the target itself, and not in an affiliate. See Informal Interpretation 1211011 (as updated). Here, however, the debt is owed by the affiliate to the acquiring person. Would 802.63 serve to reduce the transaction value by the amount of debt being paid off in this situation? Your opinion in Informal Interpretation 1505006, i.e., that 802.63 is not necessarily an all-or-nothing exemption, suggests to me that it would be available here.

Given the above scenario, would the size of the transaction be $100 million or $80 million?

Any insights you can provide, as always, are greatly appreciated.

[Redacted]

1
Sheinberg, Samuel I.
From:
Sent: 	Thursday, March 01, 2018 10:41 AM
To: 	Walsh, Kathryn E.; Berg, Karen E.; Shaffer, Kristin; Sheinberg, Samuel I.; Whitehead,
Nora; Davis, Alpa D.
Subject: 	FW: Question re Debt Payoff
From: Carson, Timothy
Sent: Thursday, March 1, 2018 10:41:13 AM (UTC-05:00) Eastern Time (US & Canada)
To:
Cc:
Subject: RE: Question re Debt Payoff

Rule802.63doesnotexemptthistransaction.

Regards,

Timothy(Ty)Carson
BureauofCompetition
FederalTradeCommission
4007 thStreet,SW
Washington,DC20024
202.326.2627
tcarson@ftc.gov

From:
Sent: Wednesday, February 28, 2018 4:07:13 PM (UTC-05:00) Eastern Time (US & Canada)
To:
Subject: Question re Debt Payoff
Acquiringperson[A]isplanningtoacquiretarget[T],asubsidiaryofacquiredperson[B],for$100million.Includedas
partoftheconsiderationforthetransaction,[A]willpayoff(orforgive)$20millionindebtowedtoitby[S],another
subsidiaryof[B](butnotthetarget).Thedebtrepresentsthereceiptofgoodsand/orservicesreceivedby[S]from[A]
thatoccurredintheordinarycourseofbusiness.

Withinthepastyear,thePNOhasclarifieditspositionondebtpayoffsthattheamountof3rdpartydebtmustbeinthe
targetitself,andnotinanaffiliate.SeeInformalInterpretation1211011(asupdated).Here,however,thedebtisowed
bytheaffiliatetotheacquiringperson.Would802.63servetoreducethetransactionvaluebytheamountofdebt
beingpaidoffinthissituation?YouropinioninInformalInterpretation1505006,i.e.,that802.63isnotnecessarilyan
allͲorͲnothingexemption,suggeststomethatitwouldbeavailablehere.

Giventheabovescenario,wouldthesizeofthetransactionbe$100millionor$80million?

Anyinsightsyoucanprovide,asalways,aregreatlyappreciated.

18030002 Informal Interpretation

Question

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