The Federal Trade Commission has approved revised thresholds for premerger notification under the Hart-Scott-Rodino (HSR) Act and for interlocking directorates under Section 8 of the Clayton Act. Formal publication of these thresholds in the Federal Register is expected to occur within the next several days. The new Section 8 thresholds will take effect at that time; the new HSR thresholds will apply to transactions that close 30 days or more after formal publication occurs.
FTC Revises Hart-Scott-Rodino Act Premerger Notification Thresholds
The Federal Trade Commission (FTC) has approved new thresholds for premerger notification under the Hart-Scott-Rodino (HSR) Act. The statute requires the FTC to revise the thresholds annually based on changes in gross national product. The newly-revised thresholds will be effective for transactions that close 30 days or more after the revised thresholds are published in the Federal Register, which we expect to occur within the next few business days.
With the changes just approved, the minimum “size-of-transaction” threshold for any acquisition of voting securities, non-corporate interests, or assets not exempt from HSR notification requirements will increase from $80.8 million to $84.4 million.
Currently, acquisitions resulting in holdings valued at more than $80.8 million, but not more than $323 million, are potentially reportable only if the size-of-person test described below is met, and acquisitions resulting in holdings greater than $323 million are potentially reportable regardless of whether the size-of-person test is met. These thresholds will increase, respectively, to $84.4 million and $337.6 million.
The size-of-person test currently provides generally that at least one “person” involved in the transaction must have annual net sales or total assets of at least $161.5 million and the other must have annual net sales or total assets of at least $16.2 million. These thresholds will increase, respectively, to $168.8 million and $16.9 million.
With the revisions, the five thresholds for acquisitions of voting securities (which specify whether a filing, or successive filing, is necessary) will potentially require notification where the acquisition results in:
- Aggregate holdings of an issuer’s voting securities valued at greater than $84.4 million, but less than $168.8 million.
- Aggregate holdings of an issuer’s voting securities valued at $168.8 million or greater, but less than $843.9 million.
- Aggregate holdings of an issuer’s voting securities valued at $843.9 million or greater.
- 25 percent of the outstanding voting securities of an issuer if the holdings are valued at greater than $1.6878 billion.
- 50 percent of the outstanding voting securities of an issuer if the holdings are valued at greater than $84.4 million.
- The graduated HSR filing fee schedule will shift as follows:
|Size (Value) of Transaction||Fee|
|Greater than $84.4 million but less than $168.8 million||$45,000|
|$168.8 million or greater but less than $843.9 million||$125,000|
|$843.9 million or greater||$280,000|
The text of the FTC’s planned Federal Register notice on the revised HSR thresholds can be found here.
FTC Revises Clayton Act Section 8 Thresholds for Interlocking Directorates
The FTC also announced revised thresholds for interlocking directorates under Section 8 of the Clayton Act. Section 8 prohibits, with certain exceptions, a person from serving as a director or officer of two competing corporations if two thresholds are met. Section 8 as enacted applies if each competitor corporation has capital, surplus, and undivided profits of more than $10,000,000, though not if the competitive sales of either corporation are less than $1,000,000. These amounts are subject to annual revision; following last year’s revision, they were $32,914,000 and $3,291,400, respectively. The new thresholds, which will take effect on the date that the FTC publishes its notice in the Federal Register, are $34,395,000 and $3,439,500, respectively.
The text of the FTC’s planned Federal Register notice on the revised Section 8 thresholds can be found here.