U.S. DoJ Sues ValueAct For Violating Premerger Notification Requirements

(RTTNews) - The U.S Department of Justice said it filed a civil antitrust lawsuit in the U.S. District Court for the Northern District of California against certain ValueAct Capital entities for violating the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or the "HSR Act". The Antitrust Division's lawsuit seeks civil penalties and an injunction against further HSR Act violations.

On November 17, 2014, Baker Hughes (BHI) and Halliburton (HAL) announced their plan to merge in a deal valued at $35 billion. Thereafter, ValueAct, an activist investment firm, purchased over $2.5 billion of Halliburton and Baker Hughes voting shares without complying with the HSR Act's notification requirements. According to the complaint, ValueAct purchased these shares with the intent to influence the companies' business decisions as the merger unfolded and therefore could not rely on the limited "investment-only" exemption to HSR notification requirements.

The complaint details how ValueAct used its access to senior executives of both Halliburton and Baker Hughes to formulate merger and other business strategies with the companies.

The HSR Act imposes notification and waiting period requirements for transactions meeting certain size thresholds so that such transactions can undergo premerger antitrust review by the department and the Federal Trade Commission. The HSR Act has a narrow exemption for acquisitions of less than 10 percent of a company's outstanding voting securities if that acquisition is made "solely for the purposes of investment" with no intention of participating in the company's business decisions.

Federal courts can assess civil penalties for premerger notification violations under the HSR Act in lawsuits brought by the department. The maximum civil penalty for an HSR violation is $16,000 per day.