New HSR Rules for Premerger Notification Filings - Effective August 18
Effective August 18, 2011, new rules apply to premerger notification filings under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, as amended (the “Act”). The new rules will require the submission of additional documents under a new Item 4(d), the reporting of additional revenues under Item 5, and the disclosure of associated entities and related information under Item 6. The HSR form will also be amended to reflect these new rules.
The new Item 4(d) expands on the concepts behind the existing, and still effective, Item 4(c). New Item 4(d) is broader than 4(c), however, and will require the filing of Confidential Information Memorandum (CIM), or equivalent documents, prepared within one year of filing of the HSR form, regardless of whether the CIM specifically addresses the transaction to be reviewed. Item 4(d) will also require submission of pitch books (even those prepared prior to engagement by the parties to the reported transaction) and other analyses compiled by third parties such as investment bankers and consultants. Item 4(d) will also require the submission of synergies analyses relating to the reported transaction.
Item 5 of the HSR form has been expanded to require the disclosure of revenues for foreign manufactured products that are sold in the US either at wholesale or retail, or which are direct shipped to US customers. Previously, foreign manufactured products sold in or into the US only had to be disclosed under the 6 digit NAICS codes if the goods were sold through related US operations. Parties will have to organize and group the revenues according to the cumbersome 10-digit NAICS codes.
Item 6 has also been expanded to capture information on “associated” entities. Previously, in transactions involving private equity funds or hedge funds, for example, acquiring funds need not have produced information about related funds in the same industry even if the funds were managed by the same general partner or were under some other common management structure because the general partner or manager did not have “control” of all of the funds. Now, acquiring entities that have minority interests in funds that are in the same line of business with the acquired entity will have to disclose the minority interests and management interests in these other entities.
While the HSR amendments have been touted as ways to streamline the HSR notification process, in practical effect they will increase the burden on the parties involved in reportable transactions, which necessarily will increase the filing costs.