Question
From: (redacted)
Sent: Wednesday, August 31, 2005 9:55 AM
To: Verne, B. Michael
Subject: Antitrust Issue Involving International Acquisition
Mike, thank you for returning my call. Below is our basic factpattern/analysis. I will call you momentarily.
Facts: We represent a U.S. corporation that is acquiring all of theshares of another U.S. corporation (the "Target") fora purchase price in excess of $50 million. Target is a holding company and Itsoperations are conducted primarily through three Mexican subsidiaries. Thesubsidiaries provide services for clients throughout the world, including U.S. clients. However, the operations and the assets of theTarget and its Mexican subsidiaries are located primarily in Mexico (the assets located in the U.S. donot exceed $50 million). Further, the operations of the Target and its Mexicansubsidiaries do not result in "sales in or into" the U.S. in excess of $50 million.
Question: Even if the transaction exceeds the HSR size-of-party and size-of-transaction thresholds, is thetransaction nevertheless exempt from the HSR pre-mergernotification requirements based on HSR Sections802.4 and 802.50?
Analysis: Sections802.50(a) provides that:
The acquisition of assets located outside the United States shallbe exempt from the requirements of the act unless the foreign assets theacquiring person would hold as a result of the acquisition generated sales inor into the U.S. exceeding $ 50 million (as adjusted) during the acquiredperson's most recent fiscal year.
Further, Section 802.4(a), which provides:
An acquisition of voting securities of an issuer or non-corporateinterests in an unincorporated entity whose assets together with those of allentities it controls consist or will consist of assets whose acquisition isexempt from the requirements of the Act pursuant to Section 7A(c) of the Act,this part 802, or pursuant to 801.21 of this chapter, is exempt from thereporting requirements if the acquired issuer or unincorporated entity and allentities it controls do not hold non-exempt assets with an aggregate fairmarket value of more than $ 50 million (as adjusted).
Thus, if our client were acquiring the Mexican assets of Targetand its Mexican subsidiaries, the transaction would be exempt under Section802.50(a) since the "foreign assets" would not generate "salesin or into the U.S." in excess of $50 million.Furthermore, since Section 802.50(a) exempts the acquisition of the assets andsince Target and its Mexican subsidiaries do not have assets in the U.S. with a value in excess of $50 million, it appears ouracquisition, as currently structured, is also exempt even though it is anacquisition of securities of a U.S. entity.We note that Section 802.4 is "based on the concept of providingconsistent treatment for exemptions regardless of the form of the transactionfor acquisitions which are unlikely to raise anticompetitive concerns."Acquisitions Under the Hart-Scott-Rodino Antitrust Improvements Act, RevisedEdition, Law Journal Seminars-Press.
Any guidance or confirmation you can provide would be appreciated.We thank you in advance for your prompt attention to this email.