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Inside the Hart-Scott-Rodino Act

At Friday's hearing in the case of Diamond Glass, during which the court approved the sale of the company's assets to Columbus, Ohio-based Belron US, Michael Richman of Foley and Lardner, counsel for Diamond, advised the judge that the two companies were still determining whether they would need to file under the Hart-Scott-Rodino Act, based on the size of the sale, which was valued at more than $54 million.

According to Thomas G. Buchanan, an attorney for Buchanan Ingersoll, the Act was developed to give the federal government a chance "to review the potential effects on competition of certain mergers, acquisitions or other consolidations … before such transactions are completed."

If this filing is required, the Federal Trade Commission (FTC) and/or Department of Justice (DOJ), which govern the act, require a 15-day waiting period before the transaction is completed.

In the case of Diamond, if the filing is required, according to Richman, Belron US has agreed to fund Diamond during the waiting period-as the Guggenheim debtor-in-possession agreement will expire on the June 30, the scheduled day for the closing of the sale.

In order for the filing to be required, according to the FTC, the following tests must be met:

  • Identification of the Parties: Both parties must be parent companies or the holders of 50 percent or more of the company's voting securities;
  • The Size-of-Person Test: One of the companies involved in the transaction must have $100 million or more in annual net sales or total assets, and the other must have $10 million or more in annual net sales or total assets;
  • The Size-of-Transaction Test: This test takes into account the "value of voting securities and assets to be held" as a result of the acquisition.

Once the filing is made, the FTC and DOJ have the opportunity to review the potential sale-and to determine whether it may violate any antitrust laws. If either the FTC or DOJ determines during the waiting period that further inquiry is necessary, it is authorized by Section 7A(e) of the Clayton Act to request additional information from the parties. This "second request" extends the waiting period ten days after the acquiring party (i.e., Belron) complies. This additional time provides the reviewing agency with the opportunity to analyze the information and to take appropriate action before the transaction is finalized.

At press time, attorneys in the case had not yet determined whether this filing was necessary.

Stay tuned to™ for more information as it becomes available.

CLICK HERE for more information on the Hart-Scott-Rodino Act from the FTC.

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