On Jan. 28, the Federal Trade Commission (FTC) published a notice to revise the premerger notification thresholds for mergers and acquisitions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act). The FTC also published revisions to the thresholds that trigger, under Section 8 of the Clayton Act, a prohibition preventing companies from having interlocking memberships on their corporate boards of directors. These revisions represent the annual adjustment of thresholds based upon changes in the gross national product.
Revised HSR Act Thresholds
The initial threshold for a notification under the HSR Act will increase from $90 million to $94 million. For transactions valued between $90 million and $376 million (up from $359.9 million), the size of the person test will continue to apply. That test will now make the transaction reportable only where one party has sales or assets of at least $188 million (up from $180 million), and the other party has sales or assets of at least $18.8 million (up from $18 million). All transactions valued in excess of $376 million are reportable without regard to the size of the parties. The new thresholds will apply to any transaction that will close on or after Feb. 27, 2020.
The following chart summarizes the threshold adjustments:
|
PRIOR THRESHOLD |
REVISED THRESHOLD |
|
Size of the transaction test |
|
|
in excess of $90 million |
in excess of $94 million (filing fee remains $45,000) |
|
Size of the person test |
|
|
$18 million/$180 million |
$18.8 million/$188 million |
|
Transaction value above which size of the person test is inapplicable |
|
|
$359.9 million |
$376 million |
In addition to adjusting upward the initial threshold for HSR notification, the amendments will adjust all subsequent notification thresholds as follows:
|
NOTIFICATION LEVELS |
|
|
in excess of $50 million |
in excess of $94 million (filing fee remains $45,000) |
|
$100 million |
$188 million (filing fee remains $125,000) |
|
$500 million |
$940.1 million (filing fee remains $280,000) |
|
25% of total outstanding shares worth more than $1 billion |
25% of total outstanding shares worth more than $1,880.2 million |
|
50% of total outstanding shares worth more than $50 million |
50% of total outstanding shares worth more than $94 million |
These notification threshold adjustments also adjust upward thresholds applicable to certain exemptions, such as those involving the acquisition of foreign assets or voting securities of foreign issuers.
Revised Section 8 Thresholds
The FTC also published revisions to the thresholds that trigger a prohibition preventing companies from having interlocking memberships on their corporate boards of directors under Section 8 of the Clayton Act. These revised thresholds are effective as of Jan. 21, 2020.
Section 8 prohibits a “person,” which can include a corporation and its representatives, from serving as a director or officer of two “competing” corporations, unless one of the following exemptions applies:
- either corporation has capital, surplus, and undivided profits of less than $38,204,000 (up from $36,564,000);
- the competitive sales of either corporation are less than $3,820,400 (up from $3,656,400);
- the competitive sales of either corporation amount to less than two percent of that corporation’s total sales; or
- the competitive sales of each corporation amount to less than four percent of each corporation’s total sales.
“Competitive sales” means “the gross revenues for all products and services sold by one corporation in competition with the other, determined on the basis of annual gross revenues for such products and services in that corporation’s last completed fiscal year.” “Total sales” means “the gross revenues for all products and services sold by one corporation over that corporation’s last completed fiscal year.”