U.S. Re g ula to ry Co nside ra tio ns fo r T ra nsa c tio ns - PowerPoint PPT Presentation

U.S. Re g ula to ry Co nside ra tio ns fo r T ra nsa c tio ns Hart-Sc o tt-Ro dino Pre me rg e r F iling s and CF I US Analysis and F iling s

Pre me rg e r No tific a tio ns Ge ne ra lly  Cro ss Bo rde r T ra nsa c tio n? – Mino rity ho lding s? – Re ve nue s?  Co nside r fo r timing a nd re so urc e s  Critic a l to c o o rdina te no t de le g a te  U.S.: HSR Ac t (size o f the tra nsa c tio n)  E U a nd it’ s me mb e r sta te s  Bra zil  China a nd I ndia  Ove r 170 jurisdic tio ns (Cypre ss!)

Ha rt-Sc o tt-Ro dino Ac t  Ha rt-Sc o tt-Ro dino Ac t o f 1976, a s a me nde d a nd its rule s a nd re g ula tio ns (“HSR Ac t”)  Purpo se a nd Ra tio na le  E le me nts: – F T C a nd DOJ ro le s; – T hre sho lds a nd E xe mptio ns; – Stra te g y a nd T iming ; – Gun Jumping ; – F iling info rma tio n a nd fe e s; – E nfo rc e me nt.

Purpo se a nd Ra tio na l o f HSR Ac t  Give s Re g ula to ry Ag e nc ie s 30 da ys to re vie w fo r a ntic o mpe titive e ffe c ts prio r to the c o nsumma tio n o f a c q uisitio n o r me rg e r;  Ame ndme nt to the Cla yto n Ac t in 1976  Ve ry diffic ult to e nfo rc e a fte r a me rg e r  Po we r o f I njunc tio n to pre ve nt me rg e r  Ab ility to re fo rm the tra nsa c tio n to ma ke it le ss a ntic o mpe titive

HSR Ag e nc ie s: DOJ a nd F T C  Ro le s o f the Ag e nc ie s invo lve d with HSR  Pre me rg e r No tific a tio n Offic e o f the F e de ra l T ra de Co mmissio n  Cle a ra nc e Be twe e n Ag e nc ie s fo r sub sta ntive re vie w

HSR T e rms a nd T hre sho lds  Ac q uiring a nd Ac q uire d Pe rso ns: Ultima te Pa re nt E ntitie s a nd Asso c ia te s  Co nc e pt o f “c o ntro l”  Co mme rc e T e st  Size o f the T ra nsa c tio n T e st – Asse t v. Vo ting Se c uritie s – No n Co rpo ra te inte re sts – Priva te E q uity F unds a nd Ma ste r Ge ne ra l Pa rtne rships  Size o f the Pa rtie s T e st

HSR E xe mptio ns  “F o re ig n Ac q uisitio n” o f no n US Asse ts  F o re ig n Ac q uisitio n o f vo ting se c uritie s o f no n-US issue r  Unde ve lo pe d re a l e sta te ;  “L o o k thro ug h” e xe mptio n;  F o rma tio n e xe mptio ns.

HSR Stra te g y a nd T iming  HSR Wa iting Pe rio d  E a rly T e rmina tio n  Ag e nc y Re vie w  I nfo rma tio na l Re q ue sts  Pull a nd Re file  Pre e mptive Re vie w  Se c o nd Re q ue sts

Co nside ra tio ns b e fo re filing HSR  Sub sta ntive Antitrust T rust Re vie w – Unde rsta nd if the re ’ s a pro b le m b e fo re yo u file – Stra te g y o ptio ns  E xpe rt he lp?  T iming I ssue s

Gun Jumping a nd Spill Ove r E ffe c ts  Co nc e pt: no me rg ing until a fte r HSR pe rio d e xpire s  Pro vide g uide line s to a ll princ ipa ls wo rking o n the me rg e r  Due Dilig e nc e issue s  I nte g ra tio n issue s

HSR F iling a nd F e e s  Pre pa ra tio n o f the HSR F o rm – Do c ume nts re q uire d – CF O invo lve me nt – 2 we e ks to 2 mo nths  HSR filing F e e s – $45,000 -- $280,000  All Pa rtie s F ile  HSR Re vie w Pro c e ss

HSR E nfo rc e me nt  F a ilure to F ile (Bill Ga te s): $16,000/ da y fine  F a ilure to pro duc e a ll re le va nt do c ume nts  Gun Jumping  Antic o mpe titive T ra nsa c tio n (Who le F o o ds e xa mple )  Me rg e rs re me die s

E xo n-F lo rio Ame ndme nt  Purpo se : to re vie w tra nsa c tio ns fo r issue s o f Na tio na l se c urity prio r to c o nsumma tio n.  Histo ry a nd b a c kg ro und o f e nfo rc e me nt  E le me nts: – T ra nsa c tio n invo lving c ha ng e o f c o ntro l – I mplic a ting Na tio na l Se c urity – 30 da y wa iting pe rio d – Jo int F iling – Stra te g y a nd c o nside ra tio ns

Co mpo sitio n o f CF I US  T he me mb e rs o f CF I US inc lude the he a ds o f the fo llo wing de pa rtme nts a nd o ffic e s: 1. De pa rtme nt o f the T re a sury (c ha ir) 2. De pa rtme nt o f Justic e 3. De pa rtme nt o f Ho me la nd Se c urity 4. De pa rtme nt o f Co mme rc e 5. De pa rtme nt o f De fe nse 6. De pa rtme nt o f Sta te 7. De pa rtme nt o f E ne rg y 8. Offic e o f the U.S. T ra de Re pre se nta tive 9. Offic e o f Sc ie nc e & T e c hno lo g y Po lic y  T he fo llo wing o ffic e s a lso o b se rve a nd, a s a ppro pria te , pa rtic ipa te in CF I US’ s a c tivitie s: 1. Offic e o f Ma na g e me nt & Budg e t 2. Co unc il o f E c o no mic Adviso rs 3. Na tio na l Se c urity Co unc il 4. Na tio na l E c o no mic Co unc il 5. Ho me la nd Se c urity Co unc il T he Dire c to r o f Na tio na l I nte llig e nc e a nd the Se c re ta ry o f L a b o r a re no n-vo ting , e x- – o ffic io me mb e rs o f CF I US with ro le s a s de fine d b y sta tute a nd re g ula tio n.

E xo n-F lo rio Ame ndme nt  E na c te d in 1988 a s a n a me ndme nt to the De fe nse Pro duc tio n Ac t o f 1950  Autho rize the pre side nt to inve stig a te fo re ig n a c q uisitio ns, me rg e rs a nd ta ke o ve rs o f o r inve stme nts in US Co mpa ny fro m a na tio na l se c urity pre spe c tive  Pre side nt ma y pro hib it a tra nsa c tio n tha t a ppe a rs to thre a te n na tio na l se c urity  Pre side nt de le g a te d a utho rity to CF I US

Whe n to Ma ke CF I US F iling  CF I US F iling is “vo lunta ry” – i.e ., no pe na lty fo r fa ilure to file .  CF I US c a n re vie w a t a ny time witho ut filing a nd ma y de la y tra nsa c tio n.  I f it is a “c o ve re d” tra nsa c tio n a nd  Ma y b e sub je c t to inve stig a tio n.

Whe n to ma ke CF I US filing  If the r e is “for e ign c ontr ol” of any pe r son e ngage d in U.S. inte r state c omme r c e ; and – Co nc e pt o f “c o ntro l” is no t fixe d (c a n b e a s little a s 10%); – E ve n if U.S. e ntity is a lre a dy fo re ig n o wne d. – I nc lude s jo int ve nture s a nd so me inve stme nts.  If a for e ign e ntity will c ontr ol str ate gic r e sour c e or affe c t national se c ur ity  I mpa irme nt o f na tio na l se c urity ha s c ha ng e d sinc e 1988 a nd is so me wha t c o ntro ve rsia l

E a rly E nfo rc e me nt  1990: Pre s Bush b lo c ke d China Na tio na l Ae ro -T e c hno lo g y I mpo rt & E xpe ro t fro m a c q uiring Ma mc o Mfg ing ;  By 1991, o nly me rg e r b lo c ke d o ut o f 500.  Ame ndme nts to stre ng the n did no t pa ss.  Po st 9/ 11 – Of six he ig hte n re vie w tra nsa c tio n b e twe e n 2003 a nd 2005, two we re Chine se

Po st 9/ 11 CF I US Re vie w  CNOOC’ s Pro po se d Ac q uisitio n o f Uno c a l • June 23, 2004, $18.5 b illio n b id fo r Uno c a l • Bid o ve r Che vro n’ s $16.4 b id • F ile d a unila te ra l CF I US filing b ut CF I US ne ve r re vie we d • Na tio na l Se c urity issue ? No spe c ia l te c hno lo g y • Po lic ita l issue s: no re c ipro c ity (if a US c o mpa ny trie d to b uy • a Chine se o il c o mpa ny) Ac c e ss to c he a p c a pita l (via Chine se g o v’ t) so b id unfa ir • Re pub lic a n pro te c tio nists/ HR 344 pa sse d • CNOOC withdre w its o ffe r •

CF I US Re vie w o f Dub a i Po rts Wo rld  DPW, o wne d b y Dub a i Go v’ t, purpo se to a c q uire a British firm tha t he ld 6 US po rts fo r $6.8 b illio n in 2006;  F ile d fo r a nd re c e ive d CF I US a ppro va l;  T he n Co ng re ss le a rne d o f the tra nsa c tio n, wa s ho stile in spite o f sa fe ty me c ha nisms in pla c e ;  DPW dive ste d the six po rts.

Po st Dub a i Po rts CF I US  We a ke n c re dib ility o f CF I US  Re sult is he ig hte ne d re vie w  2008 Guide line s (E xe c . Orde r 13456) e xpa nde d CF I US me mb e rs  2008 re q uire s se c o nd-sta g e inve stig a tio n fo r fo re ig n g o v’ ts o r c ritic a l infra struc ture .

CF I US He ig hte ne d Sc rutiny  2009: Chine se mining a c q uisitio n a b a ndo ne d in Ne va da ;  2011 Hua we i a c q uisitio n o f 3L e a f Syste ms (No filing )a nd the n a b a ndo ne d;  Se pte mb e r 2012 b lo c ks Ra lls fro m a c q uiring Wind F a rm Pro je c t – Re tro a c tive re vie w – Ne a r Na vy we a po ns syste ms tra ining Bo a rdma n OR  2013: CF I US c le a re d Wa nxia ng Gro up’ s a c q uisitio n o f A123 Syste ms – b a tte ry ma ke r) – Dive ste d milita ry a nd g o v’ t a sse ts – $257 millio n a c q uisitio n pric e

CF I US L e sso ns  I nc re a se in F iling s (20% inc re a se in 2011 o ve r 2010)  Mo re he ig hte n sc rutiny (37%) in 2011;  Co mpa re to 4% in 2007;  Do n’ t a vo id filing (Hua we i);  Ha ve a pla n in pla c e to a ddre ss c o nc e rns;  Me e t with CF I US me mb e rs;  Dista nc e fro m g o v’ t e ntity.