K&LNG
FEBRUARY 2006
Alert
Antitrust & Competition
Hart-Scott-Rodino Thresholds Increased
Pursuant to legislation adopted in 2000, there is now an annual adjustment in the dollar values in the size-of-transaction
and size-of-person tests that are used to determine what mergers and acquisitions must be filed with the Federal Trade
Commission and Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Antitrust
Improvements Act of 1975, as amended (the “HSR Act”). Beginning on February 17, 2006, only transactions valued at
$56.7 million or more will be required to complete the premerger notification process under the HSR Act. In addition,
the adjustments in dollar values affect the transaction-size criteria which determine the amount of the filing fee paid for
transactions in which a filing is required.
THE NEW FILING THRESHOLDS
The HSR Act requires certain persons making
prescribed acquisitions of assets, voting securities,
and noncorporate interests (i.e., interests in
partnerships and limited liability companies) (a) to
file premerger notifications with the FTC and the
DOJ, and (b) to wait until the expiration of a waiting
period (usually 30 days) before consummating the
acquisition. Section 7A(a)(2) of the Act requires
the Federal Trade Commission to revise annually,
based upon changes in the gross national product,
the dollar values used in determining which
acquisitions must be reported under the HSR Act.
Effective February 17, 2006, the following persons
will generally be required to observe the HSR Act’s
notification and waiting period requirements:
n
1
Persons acquiring voting securities, assets
or noncorporate interests who will hold voting
securities, assets and noncorporate interests of
the acquired person with an aggregate value of
$226.8 million or more as a result of the
acquisition1; and
n
Persons acquiring voting securities, assets or
noncorporate interests who will hold voting
securities, assets and noncorporate interests of
the target with an aggregate value in excess of
$56.7 million but not more than $226.8 million as
a result of the acquisition, provided that either the
acquiring or the acquired person has net sales or
total assets of $113.4 million or more and the
other person in the transaction has net sales or
total assets in excess of $11.3 million.
All transactions valued at $56.7 million or less will
be exempt from the notification process under the
HSR Act. However, in determining the “value” of a
transaction, the acquiring person must include the
value of all of the voting securities or assets of the
target company that the acquiring person will hold
following the completion of the deal.
A person for purposes of the HSR Act includes any
entity that is not “controlled” by any individual or
another entity (an “Ultimate Parent Entity”), together
with all entities that are directly or indirectly
controlled by the Ultimate Parent Entity. “Control”
of a corporation means holding 50% or more of its
An acquiring person purchasing noncorporate interests must obtain as a result of the acquisition the right to fifty percent (50%) or
more of the profits of the noncorporate entity or the right in the event of a dissolution to fifty percent (50%) or more of its assets after
the payment of its debts for a premerger notification filing to be required under the HSR Act. Such acquisitions are deemed to be
acquisitions of the underlying assets of the acquired person.
Kirkpatrick & Lockhart Nicholson Graham LLP
voting securities or having the present right to
designate 50% or more of its directors. “Control” of
a partnership or limited liability company means
having the right to 50% or more of its profits or the
right to 50% or more of its assets after payment of
its debts upon its dissolution.
THE NEW FEE THRESHOLDS
Fee
Size-of-Transaction
Although a premerger notification may be required
prior to the acquisition of as little as $56.7 million in
voting securities, assets or noncorporate interests, a
person who files a notification for an acquisition at
that level would have to file additional notifications
for acquisitions of voting securities or assets (but not
noncorporate interests) before crossing further
thresholds of (a) $113.4 million, (b) $567.0 million,
(c) 50% of voting securities of an entity valued at
$56.7 million or more, and (d) 25% of voting
securities of an entity worth $1,134 billion or more2.
$45,000
If the size-of-transaction is valued at
more than $56.7 million but less than
$113.4 million
$125,000
If the size-of-transaction is valued at
$113.4 million or more but less than
$567.0 million
$280,000
If the size-of-transaction is valued
at $567.0 million or more
Effective February 17, 2006, the Act will require
that in transactions requiring notification under the
Act, the acquiring person must pay the following
filing fees for acquisitions with the indicated values:
The thresholds discussed in this Alert shall apply for
one year because they will be recalculated based
upon the gross national product in 2007.
Thomas A. Donovan
tdonovan@klng.com
412.355.6466
2
The last two thresholds do not apply to acquisitions of assets.
If you have questions about this topic or would like more information on Kirkpatrick & Lockhart Nicholson Graham LLP,
please contact one of our lawyers listed below:
LONDON
NEW YORK
Neil Baylis
44.20.7360.8140 nbaylis@klng.com
Laura Harcombe
44.20.7360.8186 lharcombe@klng.com
Douglas F. Broder
212.536.4808 dbroder@klng.com
PITTSBURGH
James E. Scheuermann 412.355.6215 jscheuermann@klng.com
Thomas A. Donovan
412.355.6466 tdonovan@klng.com
www.klng.com
BOSTON • DALLAS • HARRISBURG • LONDON • LOS ANGELES • MIAMI • NEWARK • NEW YORK • PALO ALTO • PITTSBURGH • SAN FRANCISCO • WASHINGTON
Kirkpatrick & Lockhart Nicholson Graham (K&LNG) has approximately 1,000 lawyers and represents entrepreneurs, growth and middle market companies,
capital markets participants, and leading FORTUNE 100 and FTSE 100 global corporations nationally and internationally.
K&LNG is a combination of two limited liability partnerships, each named Kirkpatrick & Lockhart Nicholson Graham LLP, one qualified in Delaware, U.S.A. and
practicing from offices in Boston, Dallas, Harrisburg, Los Angeles, Miami, Newark, New York, Palo Alto, Pittsburgh, San Francisco and Washington and one
incorporated in England practicing from the London office.
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied
upon in regard to any particular facts or circumstances without first consulting a lawyer.
Data Protection Act 1988—We may contact you from time to time with information on Kirkpatrick & Lockhart Nicholson Graham LLP seminars and with our
regular newsletters, which may be of interest to you. We will not provide your details to any third parties. Please e-mail cgregory@klng.com if you would
prefer not to receive this information.
© 2006 KIRKPATRICK & LOCKHART NICHOLSON GRAHAM LLP. ALL RIGHTS RESERVED.