Wednesday, January 27, 2010

Premerger Notification Thresholds Adjusted Downward for 2010

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC has revised its thresholds for acquisitions and mergers subject to the report-and-wait requirements of the Hart-Scott-Rodino (HSR) Act. These thresholds, which will become effective February 22, 2010, were adjusted downward for the first time based on the change in the Gross National Product (GNP).

Pursuant to the HSR Act, plans for large acquisitions and mergers must be disclosed to the Department of Justice and the FTC to enable the federal antitrust enforcement authorities to examine their competitive effects and have an opportunity to challenge them under the antitrust laws prior to consummation. Only the transactions that exceed the jurisdictional thresholds need to be reported on the Notification and Report Form.

Revised Thresholds

Under the revised thresholds, acquisitions that result in an acquirer holding an aggregate total amount of the voting securities and assets of the acquired party in excess of $253.7 million will be reportable (down from the current $260.7 million), unless otherwise exempted. No transaction resulting in an acquiring person holding $63.4 million or less (down from $65.2 million or less) of assets or voting securities of an acquired person will need to be reported.

The reportability of transactions falling between these boundaries is based on the “size of person” test. Under the “size of person” test, transactions valued at more than $63.4 million but less than $253.7 million will be reportable if one party has sales or assets in excess of $126.9 million and the other $12.7 million (down from $130.3 million and $13 million, respectively).

Filing Fees

Along with notifying the agencies, parties must pay premerger filing fees. The fees are based on the size of the transaction. Under the revised thresholds, a $45,000 filing fee will be required for reportable transactions valued at less than $126.9 million (down from $130.3 million); a $125,000 filing fee will be required for reportable transactions valued at least $126.9 million but less than $634.4 million (down from $651.7 million); and a $280,000 filing fee will be assessed on the largest transactions.

Interlocking Directorates

The FTC has also released its annual recalculation of profits and sales thresholds applicable in determining whether an individual can serve as an officer or director of two or more competing corporations.

Under the new threshold amounts, effective January 21, 2010, interlocking management is prohibited if each of the companies has capital, surplus, and undivided profits in excess of $25,841,000 and the competitive sales of each corporation exceed $2,584,100. These figures were also adjusted downward. Under Sec. 8 of the Clayton Act, the FTC is required to recalculate the figures annually based on changes in the GNP.

Further information regarding the HSR thresholds will appear at CCH Trade Regulation Reporter ¶ 4231. An explanation of the rules for interlocking directorates will appear at CCH Trade Regulation Reporter ¶ 4575.

Details are available here at the FTC website.

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