Premerger Notification
Best Practice Summary

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Hart-Scott-Rodino Act (HSR) requires that parties to certain mergers and acquisitions valued over $50 million file premerger notification with the Federal Trade Commission (FTC) and Department of Justice (DOJ). The premerger notification filing provides information for the antitrust enforcement agencies to determine whether or not the proposed merger or acquisition violates antitrust laws.

Whether or not a company is required to file a Premerger Notification form is a matter of careful legal analysis. The criteria to follow is provided for general information purposes only. On January 25, 2005, Congress effected legislation increasing the minimum value of a reportable transaction under HSR as follows:

Criteria

Size of Transaction

The value of the transaction is over $53.1 million.

Size of Person Test

Filings are generally required when:

• One person's assets and revenues are valued at a minimum of $106.2 million.
  
  
• The other party has sales or assets of at least $10.7 million.
  
  
• As a result of the transaction, the Acquiring Person (as defined by 16 CFR 801.1(pdf)) will hold an aggregate amount of stock and assets of the Acquired Person valued in excess of $53.1 million.
  
  
• As a result of the transaction, the Acquiring Person will hold an aggregate amount of stock and assets of the Acquired Person value at more than $212.3 million of the sales or assets of the Acquiring or Acquired Person.

When the value of a transaction exceeds $212.3 million, a premerger notification filing is required without regard to the size of person test.

Certain transactions may be exempt from notification even if other criteria is satisfied. The Act and the Rules set forth many exemptions that are not reportable such as certain acquisitions of assets in the ordinary course of business of a person's business or certain types of real property transactions. Once determined that a particular transaction is reportable, each party must submit its notification to the FTC and DOJ and pay appropriate filing fees.

Filing Process

Instructions and definitions for filing are provided in Section 7A of the Clayton Act (the Act), 15 U.S.C. § 18a the Premerger Notification Rules (the Rules), 16 C.F.R. Parts 801-803.

Premerger Notification Filing

The Premerger filing will consist of:

• Premerger Notification Form and Instructions (pdf))
  
  The form consists of eight separate provisions plus preliminary questions. The form generally requires the name of the contact person; Names of persons involved in the transaction; The type, value and description of the transaction; Documents prepared by or for the filing person, including SEC filings, accounting reports and studies of the transaction; Dollar revenues of the reporting person for specific years; Profile of the reporting person including entity controls, stockholders and minority investments; Overlapping and geographic market data; and Description of any prior acquisitions in the same industry.
  
  
• Rule 803.5 requires an HSR Affidavit to accompany the form. In transactions where the Acquiring Person is purchasing voting securities from non-controlling shareholders the Affidavit is only required by the Acquiring Person and must state their intention to consummate the proposed transaction in good faith and that it has served notice on the Acquired Person as to its potential reporting obligation.
  
  In all other transactions, an affidavit is required by both parties and must state that a contract or agreement has been executed and that each person has a good faith intention of completing the proposed transaction.
  
  
• Rule 803.6 requires a certification by a general partner of a partnership, an officer or director of a corporation, or in the case of a natural person, the natural person or his/her legal representative.

Tips on Completing the Premerger Notification Form

In Item 2, be sure to indicate the highest notification threshold. For instance, if the percentage of voting securities is over 50% that is a higher threshold than any dollar amount of the transaction.

Item 3(a) should describe the transaction as clearly and succinctly as possible and should not reiterate the entire contract.

Item 5 of the Premerger Notification form is one of the the most common error and requires the insertion of correct NAICS numbers. 6 Digit NAICS codes refer to North American Industry Classification System codes and are obtained at NAICS. Codes should be listed in ascending order and should appear only once in any subpart of Item 5. SIC codes may be converted to NAICS using Logistics Links

Item 7 should list geographic market information geographically by state.

Documents Submitted

FTC receives:
· Two (2) copies of the premerger notification form.
· One (1) notarized original affidavit and certification.
· One (1) copy of documentary attachments.

DOJ receives:
· Three (3) copies of the premerger notification form.
· Three (3) copies of the affidavit.
· Three (3) copies of the certification.
· One (1) copy of documentary attachments.

Filing Fees and Wire Transfers

The fee is paid to the FTC and no fee is required by the DOJ.

In addition to the name of the law firm that may be submitting the wire transfer, the transmittal letter must include the filer's exact legal name and federal identification number as well as the name and taxpayer identification number of the party paying the fee, if different. A natural person should provide an exact legal name and social security number. If the filing fee is paid by more than one person, all parties submitting funds must provide their exact legal names and taxpayer numbers.

If payment is made by EWT, the Confirmation Number, the name of the institution where the transfer originated and the name of the payer (if different from the filer) is required to assure that the EWT is matched with the correct filing.

Include a copy of the confirmation receipt that is received upon payment of the wire.

Determining the Fee

The HSR Evaluation Worksheet has been provided to determine the value of the transaction for purposes of filing fees.

Addresses

Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 303
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
Telephone: 202-326-3100
FAX: 202-326-2624

Department of Justice
Antitrust Division
Premerger Notification Unit
Patrick Henry Building
601 D Street, NW
Room 10013
Washington, DC 20530
Telephone: 202-514-2558
FAX: 202-514-2363

Waiting Period

Completed Forms

The 30 day waiting period begins on the date of receipt of completed filing packages from each reporting party and the receipt of the filing fees by both the Federal Trade Commission and the Assistant Attorney General of the Department of Justice. In certain third party and open market transactions, the waiting period begins after the Acquiring Persons file required forms.

If incomplete forms were previously submitted, the waiting period begins upon the date of receipt of the form to the extent it is completed and a statement of the reasons for non-compliance. Absent early termination of waiting period, the waiting period ends on the thirtieth day after the date of receipt (15 days for cash tender offer and acquisitions subject to the federal bankruptcy provisions). If the thirtieth day falls on a Saturday, Sunday or federal holiday, the waiting period will end on the next regular business day.

Early Termination

Early termination may be requested on the premerger notification form by checking off the early termination box. Early terminations will be granted only if at least one party specifically requests it; all persons have submitted compliant forms and filing fees; and both antitrust agencies have completed their reviews. Early termination is granted for most transactions, usually within two weeks.

The FTC and the DOJ may grant early termination in individual cases by publishing a notice in the Federal Register stating that it intends to take no action with respect to such acquisition within the waiting period.

To retain confidentiality parties may elect not to request an early termination and thereby eliminating the public notice in the Federal Register.

Early terminations back to January 1998 are searchable at Federal Trade Commission.

Second Request Process

15 USC 7A(e) and 16 CFR 803.20 provide either the FTC or DOJ may request further information that will extend beyond the initial 30 day waiting period if the initial premerger notification filing raises significant antitrust questions. This request for additional information is commonly referred to a "second request". A typical second request will consist of interrogatory-type questions and requests for documents. The request may be narrowed by contacting appropriate enforcement agency and discussing the request. The agency may use an informal "quick look" procedure which specifically addresses certain critical issues. If concerns are resolved using this procedure, the waiting period will be terminated on a sua sponte basis and the parties will not be required to expend further resources on the request.

Agencies have 30 days to review second requests and decide whether to approve or seek an injunction (except cash tender and bankruptcy transactions that have a 10 day review).

Note: Whether a premerger notification filing is necessary under the rules, federal and state regulators may review any transaction if it deems that the transaction may violate antitrust laws.

The FTC's Premerger Notification Office is available for any questions at 202-326-3100. Service hours are between 8:30 AM and 5:00 PM, Monday through Friday, except federal holidays.