Increase in HSR Thresholds
The jurisdictional thresholds for premerger notification filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”) will increase February 25, 2016, and will apply to any transaction closing on or after that date. The revised thresholds will remain in effect until the next annual adjustment, expected in the first quarter of 2017.
- “Size of Transaction” Threshold. Under the new thresholds, the minimum “size of transaction” threshold has increased from $76.3 million to $78.2 million. This test is generally met if, as a result of the acquisition, the buyer will hold voting securities or assets (or noncorporate interests if the buyer will also “control” the acquired entity) of the seller with a value above $78.2 million.
- “Size of Person” Threshold. For transactions valued between $78.2 million and $312.6 million, the “size of person” test determines whether premerger notification is required. With the new thresholds, a transaction will generally meet the “size of person” test if one person (either acquiring or acquired) has annual net sales or total assets equal to or exceeding $15.6 million, and the other person has annual net sales or total assets equal to or exceeding $156.3 million. However, if a person is not engaged in manufacturing, the acquired person must have total assets of more than $15.6 million. If the transaction is valued above $312.6 million, the “size of person” test does not need to be met for premerger notification to be required.
- Increase in Interlocking Directorates Thresholds. The FTC also revised the thresholds that trigger the Clayton Act’s prohibition on interlocking directorates (service as a director or officer of two competing corporations). The new thresholds are $31,841,000 for Section 8(a)(1) and $3,184,100 for Section 8(a)(2)(A), and the revised thresholds were effective as of January 21, 2016.
- Revised Thresholds. The revised thresholds are as follows:
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- Filing Fees. The filing fees remain unchanged, but the FTC adjusted the fee structure to reflect the new thresholds. The filing fees and updated transaction value ranges are as follows:
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Updated Guidance on Two Real Estate Exemptions
Note that the FTC Premerger Notification Office (the “PNO”) has recently provided updated guidance with respect to the following real estate-related exemptions:
- Warehouse Exemption. In 2015, the PNO issued updated guidance regarding the warehouse exemption under HSR Rule 802.2(h), which exempts acquisitions of a warehouse and assets incidental to the ownership of the warehouse, except when the warehouse is to be acquired in an acquisition of a business conducted on the real property. In the past, the PNO interpreted this exemption to include oil and gas storage facilities. However, the PNO has disavowed earlier interpretations and has stated that the exemption will no longer apply to oil or gas storage facilities where the related storage or transportation business conducted on the property also will be acquired.
- Investment Rental Property Exemption. In 2015, the PNO also updated guidance regarding the investment rental property exemption under HSR Rule 802.5. Under the new guidance, this exemption will apply to acquisitions only if the buyer “behaves” like a landlord and if the buyer intends to profit from the investment in the real estate, not from the business conducted on the property. For example, if the buyer will generate revenue from business services provided on the property, rather than solely deriving rental income, then the exemption will not be available.
The rules governing whether an HSR filing is required are complex and the penalties for failing to comply are serious: parties can face fines of up to $16,000 per day. We would be pleased to assist with your analysis and any required filing.