Not Just Mergers – FTC Highlights Commonly Missed HSR Reportable Transactions

The Premerger Notification Office (the "PNO") of the Federal Trade Commission (the "FTC") recently issued a reminder about often overlooked "transactions" that may require notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The HSR Act requires parties engaged in certain transactions that meet the relevant jurisdictional thresholds, if no exemptions apply, to file a notification with the FTC and the Antitrust Division of the Department of Justice, and to observe the statutorily prescribed waiting period prior to closing. Covered transactions may include mergers, joint ventures, exclusive licenses, and acquisitions of voting securities, assets, or noncorporate interests. Failure to file can result in significant financial penalties — currently up to $41,484 per day of noncompliance.The PNO's recent blog post highlights acquisitions that do not involve a traditional payment, but which may still be reportable.

Potentially Reportable Transactions Not Involving Payment

The PNO described five categories of transactions that may be reportable even though no payment is made at the time of the acquisition.

Exchange of One Type of Interest for Another. The HSR Act covers acquisitions of voting securities of a corporation, but not acquisitions of non-voting securities of a corporation. Thus, the exchange of convertible notes of a corporation for voting securities of that same corporation is considered an acquisition of voting securities that is reportable if the relevant thresholds are met, and no exemptions apply. For example, in 2014, Berkshire Hathaway Inc. paid $896,000 in civil penalties for failing to file a notification in connection with its 2013 exchange of convertible notes of USG Corporation for voting securities. Backside Acquisitions. Sometimes when one corporation buys another, part or all of the consideration consists of the voting securities of the buyer. The seller in the "main" transaction then acquires voting securities of the buyer in a "backside" transaction. If the relevant thresholds are met for the backside transaction, and no exemptions apply, the backside acquisition of the buyer's voting securities is reportable. In fact, these types of transactions may require two notificationsone for the "main" transaction and one for the "backside" transaction. Consolidations and Acquisition of Share in NewCo. In a consolidation where two corporations combine under a NewCo that is its...