Stay Current Revised (Higher) Hart-Scott-Rodino Act Thresholds - February 2016
Paul Hastings LLP
Description
February 2016
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2016 Revised (Higher) Hart-Scott-Rodino
Act Thresholds
By J. Hart Holden
The Federal Trade Commission (“FTC”) has announced its 2016 jurisdictional and filing fee thresholds
under the Hartâ€Scottâ€Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). Due to
an increase in gross national product over the past government fiscal year, the new thresholds have
increased. The increased thresholds will become effective on February 25, 2016, and will apply to all
covered transactions filed on or after that date.
The Hart-Scott-Rodino Antitrust Improvements Act Of 1976
The HSR Act provides that, where certain jurisdictional thresholds are met, parties intending to merge
or make acquisitions must (absent any applicable exemptions) furnish the Premerger Notification
Office of the FTC and the Antitrust Division of the Department of Justice with prescribed information
regarding their respective businesses and the proposed transaction, and wait a specified period of time
before consummating the transaction.
The statutory “waiting period” stays consummation of the transaction for a minimum of 30 days (15 days in the case of bankruptcy or cash tender offers), absent a grant of early termination. Revised Thresholds For each fiscal year, the 2000 amendments to Section 7A of the Clayton Act mandate annual adjustments of the HSR Act thresholds that are based on changes in the gross national product. The revised jurisdictional and filing fee thresholds for this year increase the dollar amount limits for the size of transaction and the size of person at which parties to a transaction are required to make an HSR filing, as well as the filing fee thresholds. Many of the other filing requirements related to dollar amounts in the HSR Act have similarly been increased to remain consistent with the revised jurisdictional and filing fee thresholds. 1 .
New Jurisdictional Thresholds Under The New Jurisdictional Thresholds, A Transaction Will Be Reportable If: Old Thresholds Size of Transaction Test The Acquiring Person will hold, as a result of the transaction, an aggregate total amount of voting securities, assets and/or interests in noncorporate entities of the Acquired Person valued at in excess of $78.2 million; AND $76.3 million Size of Person Test The Acquiring Person or the Acquired Person has annual net sales or total assets of $156.3 million or more, and the other person has annual net sales or total assets of $15.6 million or more; or $152.5 million Transactions that are greater than $312.6 million are reportable, regardless of the size of person test above. $305.1 million $15.3 million New Filing Fee Thresholds Filing Fee $45,000 $125,000 $280,000 The New Filing Fee Thresholds Are As Follows: Old Thresholds If the aggregate amount of voting securities, assets and/or interests in noncorporate entities to be held as a result of the transaction is greater than $78.2 million but less than $156.3 million. $76.3 million If the aggregate amount of voting securities, assets and/or interests in noncorporate entities to be held as a result of the transaction is equal to or greater than $156.3 million but less than $781.5 million. $152.5 million If the aggregate amount of voting securities, assets and/or interests in noncorporate entities to be held as a result of the transaction is equal to or greater than $781.5 million $762.7 million $152.5 million $762.7 million 2 . Subsequent Acquisitions of Voting Securities The FTC also adjusted the HSR Act thresholds for subsequent acquisitions of voting securities. The FTC treats acquisitions of voting securities on a cumulative basis. That is, prior acquisitions of voting securities of the same party are included in the valuation of future transactions between the same parties. Whether an HSR filing is required in a subsequent acquisition between the same parties depends on the cumulative value of what the buyer will hold post-transaction, whether the parties made HSR filings in their prior transaction, and whether the parties now cross a higher HSR threshold than that of their prior filing.
Note that any prior transaction where an HSR filing was made that involved an acquisition of 50% or more of the voting securities of the target, there is no further filing obligation, period. In other situations where a prior filing was made, if a new transaction between the same parties crosses a threshold above that of the prior filing, a new filing may be required. Below are the relevant revised 2016 thresholds on this subject. As Now Revised, The New Notification Thresholds Are: Old Thresholds Voting securities valued at $156.3 million or more; $152.5 million Voting securities valued at $781.5 million or more; $762.7 million Voting securities constituting 25% of the issuer’s securities if valued at more than $1,563.0 million; and $1,525.3 million Voting securities constituting 50% of the issuer’s securities if valued at more than $78.2 million. $76.3 million Section 7(A)(g)(1) of the Clayton Act, 15 U.S.C. § 18(a)(g)(1), provides that any person, or any officer, director or partner thereof, who fails to comply with any provision of the HSR Act is liable for a civil penalty for each day during which such person is in violation.
The maximum amount of civil penalty is $16,000 per day. The FTC (the agency responsible for administering the HSR Act) has often stated that it takes compliance with the HSR premerger notification requirements seriously, that it will not hesitate to seek significant civil penalties from violators, and indeed it has backed this up in recent years with enforcement actions against a variety of defendants (including both companies and individuals). It is therefore important that all parties to a merger, acquisition, or joint venture follow adequate measures to ensure compliance with the HSR Act.  3 . If you have any questions concerning these developing issues, please do not hesitate to contact any of the following Paul Hastings Washington D.C. lawyers: J. Hart Holden 1.202.551.1773 jamesholden@paulhastings.com C. Scott Hataway 1.202.551.1731 scotthataway@paulhastings.com M.J.
Moltenbrey 1.202.551.1725 mjmoltenbrey@paulhastings.com Paul Hastings LLP Stay Current is published solely for the interests of friends and clients of Paul Hastings LLP and should in no way be relied upon or construed as legal advice. The views expressed in this publication reflect those of the authors and not necessarily the views of Paul Hastings. For specific information on recent developments or particular factual situations, the opinion of legal counsel should be sought.
These materials may be considered ATTORNEY ADVERTISING in some jurisdictions. Paul Hastings is a limited liability partnership. Copyright © 2016 Paul Hastings LLP. 4 .
The statutory “waiting period” stays consummation of the transaction for a minimum of 30 days (15 days in the case of bankruptcy or cash tender offers), absent a grant of early termination. Revised Thresholds For each fiscal year, the 2000 amendments to Section 7A of the Clayton Act mandate annual adjustments of the HSR Act thresholds that are based on changes in the gross national product. The revised jurisdictional and filing fee thresholds for this year increase the dollar amount limits for the size of transaction and the size of person at which parties to a transaction are required to make an HSR filing, as well as the filing fee thresholds. Many of the other filing requirements related to dollar amounts in the HSR Act have similarly been increased to remain consistent with the revised jurisdictional and filing fee thresholds. 1 .
New Jurisdictional Thresholds Under The New Jurisdictional Thresholds, A Transaction Will Be Reportable If: Old Thresholds Size of Transaction Test The Acquiring Person will hold, as a result of the transaction, an aggregate total amount of voting securities, assets and/or interests in noncorporate entities of the Acquired Person valued at in excess of $78.2 million; AND $76.3 million Size of Person Test The Acquiring Person or the Acquired Person has annual net sales or total assets of $156.3 million or more, and the other person has annual net sales or total assets of $15.6 million or more; or $152.5 million Transactions that are greater than $312.6 million are reportable, regardless of the size of person test above. $305.1 million $15.3 million New Filing Fee Thresholds Filing Fee $45,000 $125,000 $280,000 The New Filing Fee Thresholds Are As Follows: Old Thresholds If the aggregate amount of voting securities, assets and/or interests in noncorporate entities to be held as a result of the transaction is greater than $78.2 million but less than $156.3 million. $76.3 million If the aggregate amount of voting securities, assets and/or interests in noncorporate entities to be held as a result of the transaction is equal to or greater than $156.3 million but less than $781.5 million. $152.5 million If the aggregate amount of voting securities, assets and/or interests in noncorporate entities to be held as a result of the transaction is equal to or greater than $781.5 million $762.7 million $152.5 million $762.7 million 2 . Subsequent Acquisitions of Voting Securities The FTC also adjusted the HSR Act thresholds for subsequent acquisitions of voting securities. The FTC treats acquisitions of voting securities on a cumulative basis. That is, prior acquisitions of voting securities of the same party are included in the valuation of future transactions between the same parties. Whether an HSR filing is required in a subsequent acquisition between the same parties depends on the cumulative value of what the buyer will hold post-transaction, whether the parties made HSR filings in their prior transaction, and whether the parties now cross a higher HSR threshold than that of their prior filing.
Note that any prior transaction where an HSR filing was made that involved an acquisition of 50% or more of the voting securities of the target, there is no further filing obligation, period. In other situations where a prior filing was made, if a new transaction between the same parties crosses a threshold above that of the prior filing, a new filing may be required. Below are the relevant revised 2016 thresholds on this subject. As Now Revised, The New Notification Thresholds Are: Old Thresholds Voting securities valued at $156.3 million or more; $152.5 million Voting securities valued at $781.5 million or more; $762.7 million Voting securities constituting 25% of the issuer’s securities if valued at more than $1,563.0 million; and $1,525.3 million Voting securities constituting 50% of the issuer’s securities if valued at more than $78.2 million. $76.3 million Section 7(A)(g)(1) of the Clayton Act, 15 U.S.C. § 18(a)(g)(1), provides that any person, or any officer, director or partner thereof, who fails to comply with any provision of the HSR Act is liable for a civil penalty for each day during which such person is in violation.
The maximum amount of civil penalty is $16,000 per day. The FTC (the agency responsible for administering the HSR Act) has often stated that it takes compliance with the HSR premerger notification requirements seriously, that it will not hesitate to seek significant civil penalties from violators, and indeed it has backed this up in recent years with enforcement actions against a variety of defendants (including both companies and individuals). It is therefore important that all parties to a merger, acquisition, or joint venture follow adequate measures to ensure compliance with the HSR Act.  3 . If you have any questions concerning these developing issues, please do not hesitate to contact any of the following Paul Hastings Washington D.C. lawyers: J. Hart Holden 1.202.551.1773 jamesholden@paulhastings.com C. Scott Hataway 1.202.551.1731 scotthataway@paulhastings.com M.J.
Moltenbrey 1.202.551.1725 mjmoltenbrey@paulhastings.com Paul Hastings LLP Stay Current is published solely for the interests of friends and clients of Paul Hastings LLP and should in no way be relied upon or construed as legal advice. The views expressed in this publication reflect those of the authors and not necessarily the views of Paul Hastings. For specific information on recent developments or particular factual situations, the opinion of legal counsel should be sought.
These materials may be considered ATTORNEY ADVERTISING in some jurisdictions. Paul Hastings is a limited liability partnership. Copyright © 2016 Paul Hastings LLP. 4 .
