Hart-Scott-Rodino Act: DOJ Files Suit Against An “Activist Investor”

Sullivan & Cromwell LLP - April 7, 2016

On Monday, April 4, 2016, the U.S. Department of Justice (“DOJ”) filed a complaint against three ValueAct Capital-related entities (collectively, “ValueAct”), asserting that they violated the reporting requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) when they acquired voting securities, collectively valued at more than $2.5 billion, in both Baker Hughes and Halliburton.  All three ValueAct entities allegedly made acquisitions that exceeded the filing threshold, and so the issue as framed in the complaint is solely whether the “investment only” exemption from the HSR Act—which applies if the purchaser’s holdings constitute less than ten percent of the stock of the company and the acquisition is “solely for the purpose of investment”—applies.  The DOJ alleges that the exemption did not apply in view of, among other things, ValueAct’s alleged efforts to influence the business decisions of both companies in connection with their proposed merger, which the DOJ sued to block yesterday.  The action illustrates continued focus on the reporting requirements of “activist investors,” which were the subject of a similar enforcement action last summer.