Cadwalader attorneys reviewed proposed amendments by the FTC and the DOJ to premerger notification rules concerning how U.S. and foreign entities are defined when determining reportability under the Hart-Scott-Rodino Antitrust Improvement Act ("HSR Act").
The attorneys concluded that under the amendments, certain acquisitions of foreign voting securities and assets currently exempt from the HSR Act's filing requirements would be reportable. In particular, acquisitions by offshore funds of minority interests in a foreign issuer may no longer be exempt even though those transactions likely would not raise any competition concerns.
Comments on the proposed amendments must be received by December 30, 2019. The amended premerger notification rules will become effective 30 days after publication in the Federal Register.
Commentary
Joel Mitnick
Currently, an offshore investment fund is deemed "foreign" for purposes of the HSR Act and Rules, even if its investment manager or general partner is located in the U.S., so long as the fund is incorporated, organized and has its headquarters outside the U.S. Accordingly, such an offshore fund may acquire minority stakes in foreign issuers without needing to file HSR. The proposed changes to the Rules would result in the offshore fund being deemed a U.S. entity if either the fund's investment manager or general partner is organized or incorporated under U.S. law (or, if an individual, is a resident or citizen of the U.S.). The amended Rules may substantially increase the number of HSR filings for hedge fund managers of offshore funds that take noncontrolling interests in foreign issuers.
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