FTC, DOJ float enhanced information requirements for HSR premerger notification filing process–what will be M&A effects?

FTC, DOJ are now coming after M&A–and you thought they were tough before? New information disclosure requirements proposed by the US Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division for mergers and acquisitions that fall under the Hart-Scott-Rodino Act (HSR) may put a damper on an already stagnant business area. On Tuesday 27 June, FTC, notably taking the lead with the concurrence of DOJ, released multiple proposed changes to the premerger notification filing process, the most extensive since they were first published in 1978 after HSR was passed in 1976. HSR premerger notification is required for transactions that exceed the threshold currently set at $111.4 million.

These changes will be formally submitted for the standard 60-day public review and comment later this week in the Federal Register. Changes are typically made after that time before final rules are published, a process that may take months.

From FTC’s release, the proposed changes fall under these areas.

  • Provision of details about transaction rationale and details surrounding investment vehicles or corporate relationships.
  • Provision of information related to products or services in both horizontal products and services, and non-horizontal business relationships such as supply agreements.
  • Provision of projected revenue streams, transactional analyses and internal documents describing market conditions, and structure of entities involved such as private equity investments.
  • Provision of details regarding previous acquisitions.
  • Disclosure of information that screens for labor market issues by classifying employees based on current Standard Occupational Classification system categories.
  • These proposed changes also address Congressional concerns that subsidies from foreign entities of concern [North Korea, China, Russia, and Iran–Ed.] can distort the competitive process or otherwise change the business strategies of a subsidized firm in ways that undermine competition following an acquisition.

The National Law Review goes into far more detail on exactly what additional information will be required. This includes disclosure of what foreign jurisdictions are reviewing the deal. The rationale for the changes is that transactions have become far more complex since the original requirements were set and that the additional information will “more effectively and efficiently screen transactions for potential competition issues within the initial waiting period, which is typically 30 days.” According to FierceHealthcare, the FTC said it expects the proposed changes will take merging entities 144 hours per filing, up from the current 37-hour average. It’s clear that the mountain of information already needed to file a pre-merger notification and the time needed to gather such information will be much higher, perhaps to months and reveal far more than perhaps some companies want to disclose.

For those surprised that FTC is taking the lead on this, this once-sleepy agency woke up late last year in a heckuva bad humor and is now (more…)

Breaking: CVS’ Signify Health buy under DOJ scrutiny in ‘second request’

Not unexpectedly, the US Department of Justice (DOJ) is taking a hard look at the Signify Health acquisition by CVS Health. The two companies were notified Wednesday on DOJ’s Second Request for information. This was disclosed on an SEC Form 8-K. The DOJ now has 30 additional days to investigate antitrust aspects of the merger, once that additional information is received. 

The timetable goes like this:

  • 19 Sept: CVS filed its premerger notification and report with the DOJ and the Federal Trade Commission (FTC) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR). This initiates a 30-day waiting period.
  • 19 Oct: At deadline, the request for additional information initiated by the DOJ was received by both CVS and Signify (Second Request)
  • The Second Request extends the waiting period under the HSR Act by 30 days after both CVS and Signify have substantially complied with the Second Request. The DOJ can terminate the waiting period earlier, or move it to an agreed-upon later date. 

CVS continues to affirm closing the deal by first half 2023 as planned, which is a fairly wide window.

The current government’s DOJ and FTC have made no secret of their policy-driven yen for using antitrust in the name of lowering healthcare costs (even favored pharma). The crashing failure of DOJ’s antitrust motions against UnitedHealthGroup and Change Healthcare [TTA 20 Sept] must have smarted. What this usually initiates is the search for a quick and easy win to put said embarrassment behind them. CVS Health is certainly a high-profile target, though Signify even at $8 billion, like Change, is not except in the industry. 

Signify’s competitive overlap with CVS/Aetna isn’t as large or obvious as UHG’s Optum with Change, but there is some: home health management and (in this Editor’s view), ACO management services with Signify’s Caravan, which participates in multiple Federal shared savings models where Aetna also is. One wonders if some divestment will be demanded by DOJ. Even before the auction, Signify started the complicated and long exit from the failing Bundled Payments for Care Improvement (BPCI) programs inherited from the Remedy Partners buy.

Could the DOJ action have played a role in CVS’ sudden cold feet in acquiring Medicare/Medicaid primary care provider Cano Health? [TTA 20 Oct] The timing is certainly close. 

DOJ is not working alone. The FTC also has a yen for Amazon in their 2 September second request for information on their acquisition of OneMedical, which also added 30 days to the Hart-Scott-Rodino (HSR) clock after compliance. Amazon is already going through this with their iRobot acquisition [TTA 15 Sept]. Reuters, FierceHealthcare, Home Health Care News

CVS-Aetna: DOJ requests additional information at deadline (updated for CVS earnings)

[grow_thumb image=”https://telecareaware.com/wp-content/uploads/2017/12/canary-in-the-coal-mine.jpgw595.jpeg” thumb_width=”150″ /]The Canary Tweets. The sources [TTA 8 Dec] were correct that the Department of Justice (DOJ) would take the lead on reviewing the CVS-Aetna merger. Yesterday (1 Feb) they did, requesting additional information. This extends the waiting period for an additional 30 days or more.  The CVS Form 8-K (SEC), which reports the request for information, is here courtesy of Seeking Alpha.

The US law governing this is the Hart-Scott-Rodino Act Antitrust Improvements Act of 1976 (HSR). A pre-merger notification and report was filed with DOJ and the Federal Trade Commission (FTC) on 2 January. There’s a 30-day period for an additional information request and that was taken by the DOJ yesterday. The length of the compliance process may extend for 30 days but may be less if the request is satisfied or more if requested by the parties involved. 

CVS and Aetna still hope to complete the merger by the second half of 2018. The respective shareholder meetings are already scheduled for 20 March. Our previous coverage here.

Editor’s thoughts: CVS-Aetna, despite its size, is a relatively straightforward merger, but because of its nature and size, expect some political haymaking and delays to come. This will be a preview of the action around the Amazon-Berkshire Hathaway-JPMorgan Chase cooperative partnership, in whatever they decide to create, if they create: “there’s many a slip twixt cup and lip.”

Updated for 4th Quarter Financials: CVS is reasonably healthy and nimble. Their earnings report is positive in earnings, operating profit, and reinvestment versus prior year. Under US securities law, it’s silent on Aetna. Form 8-K and press release via Seeking Alpha.