Updated thresholds under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. §18a) (HSR) were published in the Federal Register on January 21, 2010. For the first time, HSR thresholds are decreasing. The threshold adjustments are mandated by the major HSR amendments in 2000 that require annual indexing of the thresholds based upon changes in gross national product (GNP) for each fiscal year beginning after September 30, 2004. Accordingly, the HSR thresholds now are adjusted annually. Due to the recent economic downturn, GNP declined for the fiscal year ended September 30, 2009, resulting in the lowered thresholds. The new thresholds will become effective on February 22, 2010 for transactions that close on or after that date.
Size-of-Transaction Test
(Original: $50 million; Current: $65.2 million; New: $63.4 million)
The 2000 HSR amendments raised the size-of-transaction test to $50 million. This figure is currently $65.2 million based upon last year's annual adjustment and shortly will decrease to $63.4 million. Accordingly, under the current size-of-transaction test, no HSR filing is required unless the acquisition results in an acquiring person holding an aggregate total amount of voting securities, non-corporate interests, and/or assets of the acquired person in excess of $65.2 million (to decrease to $63.4 million).
Change in Size-of-Transaction Test
$50 million as of February 1, 2001
$53.1 million as of March 2, 2005
$56.7 million as of February 17, 2006
$59.8 million as of February 21, 2007
$63.1 million as of February 28, 2008
$65.2 million as of February 12, 2009
$63.4 million as of February 22, 2010
Size-of-Parties Test
(Original: $10 million/$100 million; Current: $13 million/$130.3 million; New: $12.7 million/$126.9 million)
Under the current thresholds, acquisitions valued above $260.7 million are reportable regardless of the size of the parties, and acquisitions valued at greater than $65.2 million (to become $63.4 million) but less than or equal to $260.7 million are reportable only if the size-of-parties test is met. The $260.7 million threshold will adjust downward to $253.7 million.
The current size-of-parties test typically is met if the acquiring or acquired person has annual net sales or total assets of $130.3 million or more and the other person has annual net sales or total assets of $13 million or more. The current $13 million/$130.3 million test will adjust to $12.7 million/$126.9 million.
Notification Thresholds
An acquiring person in a reportable acquisition of voting securities files for the highest applicable among five notification thresholds. The notification threshold may determine, for example, whether a subsequent acquisition of additional voting securities from the same acquired issuer will require another HSR filing. The new notification thresholds that will become effective with the forthcoming adjustments are:
An aggregate total amount of voting securities of the acquired person valued at greater than $63.4 million but less than $126.9 million
An aggregate total amount of voting securities of the acquired person valued at $126.9 million or greater but less than $634.4 million
An aggregate total amount of voting securities of the acquired person valued at $634.4 million or greater
Twenty-five percent of the outstanding voting securities of an issuer if valued at greater than $1,268.7 million
Fifty percent of the outstanding voting securities of an issuer if valued at greater than $63.4 million
Filing Fee Thresholds
The filing fee amounts are not changing, but the thresholds for application of the fees are decreasing.
The filing fee currently is $45,000 if the aggregate amount of assets, non-corporate interests, and voting securities to be held as a result of the acquisition is more than $65.2 million (to become $63.4 million) but is less than $130.3 million (to become $126.9 million)
The filing fee currently is $125,000 if the aggregate amount of assets, non-corporate interests, and voting securities to be held as a result of the acquisition is from $130.3 million (to become $126.9 million) to less than $651.7 million (to become $634.4 million)
The filing fee currently is $280,000 if the aggregate amount of assets, non-corporate interests, and voting securities to be held as a result of the acquisition is $651.7 million (to become $634.4 million) or more
Most, although not all, of the dollar amounts in the HSR rules will be adjusted downward based upon the threshold indexing discussed above. It remains important that parties be very careful in determining if a threshold is met given that the process can be very complex, the rules are highly technical, and failure to comply with HSR can result in significant civil penalties. In analyzing a potential past failure to file under HSR, it is necessary to look at the thresholds in place at the time of closing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.