GUIDE TO THE APPLICATION OF THE HART-SCOTT-RODINO PREMERGER NOTIFICATION REQUIREMENTS AND PREPARATIONS OF HSR ACT NOTIFICATION AND REPORT FORM
| Jurisdiction | United States |
(May 2008)
GUIDE TO THE APPLICATION OF THE HART-SCOTT-RODINO PREMERGER NOTIFICATION REQUIREMENTS AND PREPARATIONS OF HSR ACT NOTIFICATION AND REPORT FORM
Gibson, Dunn & Crutcher LLP
Washington, D.C.
I. Determining whether a transaction is reportable
Premerger notification and compliance with the HSR Act waiting period is required prior to acquisition of any assets, voting securities or controlling "non-corporate interests" if (A) the parties meet certain jurisdictional size-of-person tests, (B) the jurisdictional size-of-transaction test is met, and (C) no exemption applies. For certain relatively large transactions, the size-of-person tests do not apply; these transactions are reportable unless an exemption applies.
The statutory waiting period that results from the notifications is thirty days (fifteen days for a cash tender offer or an acquisition in bankruptcy) but cannot end on a weekend or holiday and may be extended if a request for additional information or documentary material is issued by the Federal Trade Commission or the Antitrust Division of the U.S. Department of Justice. Such a "second request" normally extends the waiting period until the parties have responded, and for thirty additional days (ten days for a cash tender offer, and again, the extended waiting period cannot end on a weekend or holiday). Before expiration of the waiting period, the enforcement agencies may challenge the proposed transaction in federal court and seek an injunction to prevent its consummation.
Every acquisition of assets, voting securities, or non-corporate interests must be separately analyzed to determine whether it is reportable under the HSR Act. A transaction may consist of more than one such acquisition; in particular, if voting securities, non-corporate interests, or assets other than cash are received by an acquired person from an acquiring person as consideration, additional notifications may be required for that acquisition by the acquired person.
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A. Definitions of key terms
A "person" consists of an "ultimate parent entity" and all entities which it "controls," directly or indirectly. Controlled entities are referred to as being "included within the person".
An "ultimate parent entity" is an entity which is not "controlled" by any other entity.
A corporation is "controlled" by each entity that holds voting securities representing 50% or more of the voting power to elect directors, and by each entity having a contractual power presently to designate (i.e., to remove and replace) half or more of the corporation's directors.
A partnership or other unincorporated entity, such as a limited liability company, that does not issue voting securities is "controlled" by each entity having a right to 50% or more of the profits of the entity or having the right to 50% or more of the entity's assets in the event of its dissolution.
"Voting securities" are securities which entitle the owner or holder of the securities to vote for election of the directors of the corporate issuer, or any affiliate of the issuer.
A "non-corporate interest" is a right to any of the profits of a partnership, LLC or other unincorporated entity, or a right to any of the assets of such an entity in the event of its dissolution. Acquisitions of non-corporate interests are reportable only if they result in the acquiring person's controlling the unincorporated entity (i.e., having a right to 50% or more either of its profits or of its assets in dissolution).
A natural person is always an ultimate parent entity. Holdings of spouses and minor children are aggregated for purposes of these rules.
Special rules relate to "control" of a trust.
B. Identifying the acquiring and acquired persons
1. An "acquiring person" is any person which, as a result of an acquisition, will hold, either directly or indirectly, voting securities, assets, or non-corporate interests of another person.
2. An "acquired person" is any person within which is included an entity whose assets, voting securities, or non-corporate interests are being acquired.
3. A person may be both an acquiring person and an acquired person with respect to separate acquisitions which comprise a single transaction.
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4. Special rules apply to mergers, consolidations or other transactions that combine all or part of the business of two or more persons.
C. Applying the size-of-transaction test
1. Will more than $252.3 million worth of the acquired person's assets, voting securities, controlling non-corporate interests, or any combination thereof be held by the acquiring person as a result of the acquisition? If so, the transaction is reportable (unless an exemption applies), regardless of the sizes of the parties, since the statutory size-of-person tests (see below) do not apply to transactions of this size.
2. If not, will more than $63.1 million worth of the acquired person's assets, voting securities, controlling non-corporate interests or any combination...
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