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Proposed Bill to Substantially Increase HSR Merger Filing Fees for Deals Greater Than $5 Billion Advances Out of Committee

On Thursday, May 13, the US Senate Judiciary Committee voice-vote approved and advanced Senator Amy Klobuchar’s (D-MN) Merger Filing Fee Modernization Act of 2021. This bill seeks to increase HSR filing fees required for mergers and acquisitions, altering fees for all transactions, and substantially increasing HSR filing fees for deals greater than $5 billion to $2.25 million. HSR filing fees have not been updated since 2001.

The proposed bill would further increase the fees each year in accordance with the Consumer Price Index. In an effort to gain bipartisan support, the bill would decrease filing fees for smaller transactions, while increasing fees significantly for all deals over $500 million. Below are tables showing the proposed HSR filing fees versus the current HSR filing fees based on transaction size.

Although no changes are imminent, the advancement of this bill indicates politicians’ continued focus on increasing the burden on mid-size and larger companies seeking to merge, while slightly reducing fees for smaller transactions.Senator Klobuchar has argued that the substantial increase in fees for larger deals is needed because of the government cost required to investigate larger deals. Further, she said she believes the affected parties, such as major technology companies, could easily handle the cost because it is a small expense compared to the amount these companies often spend on legal and professional support in effectuating the deals.




FTC Settlement Agreement Demonstrates Commissioners’ Competing Views on Merger Non-Competes

What Happened

  • DTE and Enbridge’s natural gas pipeline joint venture, Nexus, agreed to purchase the Generation Pipeline (Generation).
  • Generation was owned by a group of sellers including North Coast Gas Transmission (North Coast).
  • Generation’s primary asset is a 23-mile pipeline that serves the Toledo, Ohio, area.
  • North Coast continues to own a competing pipeline near Toledo, Ohio.
  • The purchase agreement contained a non-compete provision that prevented the sellers, including North Coast, from competing in three counties surrounding Toledo, Ohio, for three years.
  • After an investigation, the FTC announced a settlement with DTE, Enbridge and Nexus to remedy the FTC’s concern with the non-compete provision by requiring the purchase agreement to be amended to remove the non-compete provision.
  • The FTC Commissioners were unanimous in their conclusion that the challenged non-compete was unlawfully broad, though several Commissioners issued concurring statements regarding the import of the FTC’s action in this case.

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The Latest: Health Care Transactions Will Require Advance Notice to Washington State AG

What Happened:

  • On May 7, 2019, Governor Jay Inslee of Washington State signed House Bill 1607 into law. The law goes into effect for transactions closing after January 1, 2020, and requires advance notice to the Washington Attorney General (AG) of certain transactions 60 days in advance of closing the transaction. The intent of the law is “to ensure that competition beneficial to consumers in health care markets across Washington remains vigorous and robust[.]”
  • Parties must file written notice with the AG for any deal that involves two or more hospitals, hospital systems, or other provider organizations that represent seven or more health care providers in contracting with insurance companies or third-party administrators. A “provider” includes a physician, nurse, medical assistant, therapist, midwife, athletic trainer, home care aide, massage therapist, among others.
    • The law can apply to transactions involving very small medical groups, as long as there are seven providers who contract with insurance providers. The law can also apply to transactions with non-Washington parties if the out-of-state party generates $10 million or more in revenue from Washington patients.
  • Given the relatively low thresholds for an AG filing, this law would require notifications for transactions that are not reportable under the Hart-Scott-Rodino Act (HSR Act), as well as those that are reportable under the HSR Act.
    • If a transaction is HSR reportable, the parties must submit their HSR filing to the AG.
    • If a transaction is not HSR reportable, parties must submit the following information in writing to the AG:
      • The names and addresses of the parties;
      • The locations where health care services are provided by each party;
      • A brief description of the nature and purpose of the proposed transaction; and
      • The anticipated effective date of the transaction.
    • The notification requirement applies to mergers, acquisitions and contracting affiliations. A contracting affiliation is a “formation of a relationship between two or more entities that permits the entities to negotiate jointly with carriers or third-party administrators over rates for professional medical services” but does not include arrangements among entities under common ownership.
    • The penalty for noncompliance is $200 per day.
    • The AG has 30 days from the date of notice to submit a request to the parties for additional information. If the AG has antitrust concerns, it may serve a civil investigative demand to investigate.

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Change in LBO Valuation for HSR Purposes

The Federal Trade Commission (FTC) recently reversed its position on how to calculate the size-of-transaction for HSR purposes in connection with leveraged buyouts (LBOs). This change in position may result in more reportable transactions.

As detailed here, the FTC’s position, effective immediately, is that any new debt used to finance an LBO transaction, counts toward the size of transaction. Previously, whether or not new debt used to finance an LBO transaction was included in the size of transaction turned on whether the buyer or the target company incurred, provided, or guaranteed the debt.

This does not change the treatment of payment of third-party debt out of transaction consideration:

  • In equity transactions, payment of third-party debt that is deducted from the consideration ultimately paid by the buyer to seller is not included in the size of transaction (e.g., $100 million purchase price of which $30 million goes to pay off third party debt = $70 million transaction for HSR purposes).
  • In asset acquisitions, assumption of liabilities continues to be additive to the purchase price (e.g., $50 purchase price plus $30 million in assumed liabilities = $80 million transaction for HSR purposes).



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