Higher Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced
1. Higher Thresholds For HSR Filings
On January 24, 2012, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in gross national product and will be effective thirty days after publication in the Federal Register. Publication is expected within a week, so the new thresholds will most likely become effective in late February 2012. Acquisitions that have not closed by the effective date will be subject to the new thresholds.
Continue Reading Questions & commentsDelaware Chancery Court Considers Whether a Reverse Triangular Merger Constitutes an Assignment by Operation of Law
In Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, C.A. No. 5589-VCP (Del. Ch. Apr. 8, 2011), the Delaware Court of Chancery denied a motion to dismiss a breach of contract claim, holding that a reverse triangular merger may constitute an assignment by operation of law. In the first Delaware case to address this issue, the Court found plausible plaintiff’s argument that an assignment “by operation of law” covers mergers that effectively operate like an assignment. The Court held that Delaware’s stock acquisition jurisprudence is not controlling with respect to reverse triangular mergers. In its decision, the Court indicated that the actions a buyer takes after a reverse triangular merger with respect to the target company are relevant to whether an anti-assignment clause is triggered.
Delaware Court Enjoins Merger Vote Citing Conflicts of Interest of Financial Advisor
A recent decision by the Delaware Court of Chancery has provided a stark reminder that buyers, directors of target firms and financial advisors must be mindful that conflicts of interest affecting a target’s financial advisor will be closely scrutinized by the courts.
New Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced
1. New Thresholds For HSR Filings
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) imposes notification and waiting period obligations on parties to certain mergers, acquisitions, formations of joint ventures and unincorporated entities, and other transactions. Parties to an HSR-reportable transaction must notify the federal government and observe a waiting period, usually 30 days, before completing the transaction. A transaction is generally reportable if it meets a Size of Transaction test and a Size of Person test. Each “person” who is a party to an HSR-reportable deal must file an HSR notification with the Department of Justice Antitrust Division and the Federal Trade Commission.
Treatment of Accrued But Unused Vacation in Asset Deals
The treatment of accrued but unused vacation pay (hereinafter, referred to as "Vacation Benefits") in the context of selling a business has arisen in recent transactions involving clients advised by the firm's Corporate Practice Group. This gives us an opportunity to remind business owners operating in California of the landscape of the rules associated with the payment of Vacation Benefits and the practice of transferring those liabilities to the new employer in the sale of a business.
Lower Filing Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced
1. Lower Thresholds For HSR Filings
On January 19, 2010, the Federal Trade Commission announced revised, lower thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The filing thresholds are revised annually, based on the change in gross national product. For the first time, the thresholds have been reduced. They will be effective thirty days after publication in the Federal Register. Publication is expected to occur this week. Thus the new thresholds will most likely become effective late February 2010. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Filing persons must wait a designated period of time, usually 30 days, before completing their transactions. The HSR Act imposes premerger notification and waiting period obligations on transactions over a certain size, where the parties are over a certain size, before those transactions may be completed. Each "person" who is a party to an HSR-reportable deal must file an HSR notification with the Department of Justice Antitrust Division and the Federal Trade Commission.
DELAWARE SUPREME COURT HOLDS THAT MINORITY STOCKHOLDERS IN A SHORT FORM MERGER ARE ENTITLED TO "QUASI-APPRAISAL" REMEDY WHEN MATERIAL FACTS ARE NOT DISCLOSED
In Berger v. Pubco Corporation, Case No. 509, 2009 WL 1976529(Del. July 9, 2009), the Delaware Supreme Court held that minority stockholders are entitled to a “quasi-appraisal” remedy to recover the difference between the fair value of their shares and the merger price. The Court also held that these stockholders did not have to opt-in to the appraisal proceedings or to escrow proceeds received from the merger. The decision in Berger resolves an important question, previously unclear under Delaware law, regarding the nature and scope of the remedies available to minority stockholders who allege misconduct by directors in connection with short form mergers.
Continue Reading Questions & commentsDelaware Supreme Court Reverses Chancery Court's Lyondell Decision, Provides Guidance Regarding Application of Revlon Doctrine
On Wednesday, March 25, 2009, the Delaware Supreme Court issued an opinion reversing the Chancery Court's decision in Ryan v. Lyondell Chemical Co., 2008 WL 2923427 (Del. Ch. July 29, 2008). We posted about the Chancery Court decision on the Corporate and Securities Law Blog here. In reversing the Chancery Court decision, the Delaware Supreme Court granted summary judgment in favor of Lyondell’s directors and in doing so held that a board of directors determination to adopt a “wait and see” approach in response to an unsolicited takeover bid was subject to the business judgment and that Revlon duties did not apply until the Board began negotiating with the bidder. This case provides important guidance for directors of Delaware corporations in discharging their fiduciary duties in connection with company sales.
Continue Reading Questions & commentsNew Filing Thresholds for HSR Act Premerger Notifications
On January 6, 2009, the Federal Trade Commission announced revised thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. They will be effective thirty days after publication in the Federal Register. Publication is expected to occur in the next few days. Thus the new thresholds will most likely become effective mid-February 2009. Acquisitions that have not closed by the effective date will be subject to the new thresholds. Filing persons must wait a designated period of time, usually 30 days, before completing their transactions. The HSR Act imposes premerger notification and waiting period obligations on transactions over a certain size, where the parties are over a certain size, before those transactions may be completed. Each "person" who is a party to an HSR-reportable deal must file an HSR notification with the Department of Justice Antitrust Division and the Federal Trade Commission.
Continue Reading Questions & commentsTumultuous Times Lead To "Business Divorces"
Picture this:
You and your partner have not been contributing equally to your business or seeing eye to eye for quite some time, but with a good economy and a healthy income from the business you let sleeping dogs lie. Or, you now see an opportunity to grow your business despite the ongoing uncertainty in the economy, and you can't get your cautious business "partner" to budge.
The world is changing and you and the business cannot sit still. Gritting your teeth, you tell yourself that if only you had sole control . . . things would change!
If it’s any consolation, you're not alone; difficult times strain even the best business partnerships in many ways, often causing disastrous breakups and business failure.
On the other hand, a bad economy can provide the catalyst for a successful business divorce if it tempts the hesitant partner to get out while the getting is good – and if the remaining partner understands the roadblocks along the way to a breakup.
By a "business divorce," we mean a buy-out of an owner by the other owner or the business itself, whether it be a corporation, partnership, limited liability company or other form of enterprise. The more owners, the more complicated this process becomes.
Treasury Issues Final Rules Describing Procedures For Reviewing Foreign Investment In U.S. Companies
Effective December 22, 2008, the U.S. Department of the Treasury (“Treasury”) issued new rules relating to the procedures that the Committee on Foreign Investment in the United States (“CFIUS” or “the Committee”) will use in reviewing foreign investments in U.S. companies. See 73 Fed. Reg. 70702. The revised, final rules continue to focus on the potential impact that a particular transaction may have on U.S. national security and retain many of the features of the proposed rules, which we have previously discussed here and here.
Continue Reading Questions & comments"Go-Shop" Provisions in M&A Transactions
Increasingly in recent years, purchase agreements are being negotiated to add a go-shop provision, permitting a target's board not only to consider unsolicited offers but also to actively solicit bids for the target for a limited period of time in order to fulfill target board fiduciary duties to shareholders. The term "go-shop" is a relatively new addition to M&A transaction terminology. "Go-shop" refers to a provision in a purchase agreement that permits a target company's board of directors to actively solicit competing bids for a specified period of time following the execution of the agreement. Over the last two years, go-shop provisions have become more common. According to a recent ABA study, 2% of deals announced in 2005 had go-shop provisions while 29% of deals announced in 2006 had them.
Continue Reading Questions & commentsNew HSR Thresholds Announced
On January 18, 2008, the Federal Trade Commission announced new jurisdictional and filing fee thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Section 7A of the Clayton Act, 15 U.S.C. § 18a, et seq. (the “HSR Act”). The new HSR thresholds will apply to transactions that close on or after February 28, 2008. The new minimum HSR threshold for a reportable transaction is $63.1 million. The amount of the filing fees are not changed, although the thresholds that determine the amount of the filing fee are increased.
Continue Reading Questions & commentsTennessee Court Orders Buyer to Complete Acquisition in Genesco Deal
No MAE Occurred Based on Merger Agreement Carve-Out
On December 27, 2007 the Tennessee Chancery Court ordered sportswear retailer Finish Line, Inc. (FINL.O), to complete its purchase of Tennessee-based shoe and hat retailer Genesco, Inc. (GCO.N), as contemplated by a merger agreement offering $54.50 per share for a total purchase price of $1.5 billion.
Continue Reading Questions & commentsSEC Amends "Best Price" Rule
Amendments to the best price rule applicable to tender offers for securities registered under the Securities Exchange Act of 1934 became effective in December 2006. The best price rule requires that the consideration paid to any security holder in a tender offer be the highest consideration paid to any other security holder in the tender offer with the result that all shareholders are to be treated equally.
Continue Reading Questions & commentsThe Importance of Well-Crafted MAE Provisions: Sallie Mae in Courtroom Battle with J.C. Flowers-led Buyout Group
As of October 24, 2007, Sallie Mae and the buyout group led by J.C. Flowers have failed to negotiate an agreement on dropping conditions of the buyout deal that prevent Sallie Mae from talking to other potential suitors. This comes following the buyout group's assertion that a Material Adverse Effect has occurred and that it does not intend to proceed with the buyout deal. In response to the buyout group's "cold feet," Sallie Mae filed suit in Delaware seeking payment of a $900 million termination fee.
Continue Reading Questions & commentsDelaware Chancery Court Criticizes Small-Cap Company's Board For Failing To Fulfill Revlon Duties When Selling Company To Private Equity Firm
In In re Netsmart Technologies, Inc. Shareholders Litigation, C.A. No. 2536-VCS (Del. Ch. Mar. 14, 2007), Vice Chancellor Strine held that the shareholder plaintiffs demonstrated a probability of success on the merits of their claim that the Netsmart board of directors failed to fulfill their Revlon duties in considering and approving a cash sale of the company to two private equity firms. The Court determined that the board’s decision not to conduct a broad market canvass for strategic acquirers, and instead focus the search for acquirers solely on private equity firms, did not appear to be reasonable under the circumstances. The Court also held that the post-signing “market check” recommended by the company’s financial advisers was not appropriate for a small-cap company like Netsmart, thus was far too passive to have been effective in mitigating the narrowness of the pre-signing market canvass. This decision provides guidance to boards when considering a sale to a private equity firm — an increasingly common situation affecting boards of directors of public companies throughout the country.
Continue Reading Questions & commentsAssignability of IP License Agreements in Reverse Triangular Mergers
Delaware Ruling Questions Generally Accepted Merger Practices
A recent Delaware Chancery Court decision raises questions about certain common merger practices. The opinion, In re TCI Shareholders Litigation, criticizes both:
- the use of a contingent fee arrangement by an investment bank that issued a fairness opinion to a special committee; and
- a special committee's use of investment bankers and legal counsel who had worked for the company.
