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.
Generally, the HSR Act requires the parties to transaction that meet two tests (a reportable transaction) to notify the Federal Trade Commission and the Department of Justice’s Antitrust Division of the transaction and provide certain information and documentation. The two tests a transaction must meet to be reportable are the “size of the transaction” test and the “size of persons” test; however, the “size of persons” test is eliminated for certain large transactions (i.e., those valued at more than $252.3 million). If a transaction is reportable, the parties may not close the transaction prior to the expiration or early termination of the initial waiting period (30 days, or 15 days in the case of a cash tender offer). The agencies may investigate the reportable transaction during the initial waiting period and may extend the waiting period by issuing a “second request.” If one of the agencies issues a second request, the reportable transaction cannot close until 30 days after the parties have substantially complied with the second request (15 days in the case of a cash tender offer).
Under the new thresholds, (i) the “size of the transaction” test is satisfied if, as a result of the transaction, the acquiring person (as defined under the HSR Rules) will acquire and hold certain assets, voting securities, and/or interests in non-corporate entities valued at more than $63.1 million, and (ii) the “size of persons” test is satisfied if one “person” has at least $12.6 million in annual net sales or total assets and the other party has at least $126.2 million in annual net sales or total assets.
Three important concepts should be highlighted in connection with the “size of persons” test. A “person” under the HSR Rules means an “ultimate parent entity” and all entities which it controls, directly or indirectly. An “ultimate parent entity” is an entity or natural person that controls the buyer or seller and is not itself controlled by anyone else. “Control” within the meaning of the HSR Rules means (1) either (i) holding 50% or more of the outstanding voting securities of an issuer or (ii) in the case of an unincorporated entity, having the right to 50% or more of the profits of the entity, or have the right in the event of dissolution to 50% or more of the assets of the entity; or (2) having the contractual power presently to designate 50% or more of the directors of a for-profit or not-for-profit corporation.
For persons not engaged in manufacturing, only total assets are considered in calculating the “size of persons” test. Further, the “size of persons” is eliminated for transactions valued at greater than $252.3 million, in which case the transaction is reportable regardless of the size of the parties.
While the HSR filing fees were not changed, the thresholds that determine the amount of the filing fee were increased. Under the new thresholds, for reportable transactions valued under $126.2 million, the filing fee is $45,000; for reportable transactions valued at or above $126.2 million and below $630.8 million, the filing fee is $125,000; and for reportable transactions valued at or above $630.8 million, the filing fee is $280,000.
Please note that the above summary provides general guidelines only. The HSR Rules have many exceptions, exemptions and fine points.