August 19, 2009

Beware: Antitrust Review of Nonreportable Transactions

The recent abandonment of the Endocare Inc./Galil Ltd.merger highlights the potential for antitrust scrutiny of transactions even if they are not subject to Hart-Scott-Rodino pre-merger review. As descrived in this Cahill Gordon memo, Endocare announced in June that it was terminating its proposed merger with Galil – midway through the FTC investigation. Although the transaction was not reportable under HSR, the companies appear to have received subpoenas from the FTC seeking information not unlike that typically sought by a “second request.”

Although it doesn’t happen often, nonreportable transactions can be investigated by the antitrust enforcement agencies if the agencies become aware of the transaction and perceive a potential antitrust concern. This case also highlights the importance of early identification of any antitrust issues, the allocation of antitrust risk among the parties and the negotiation of the terms of the parties’ conduct in response to any investigation or other challenge prior to closing a merger.

Not long after the abandonment of the Endocare/Galil merger, Endocare announced that it had enetered into a merger agreement with HealthTronics. Galil sued Healthronics in the Delaware Chancery Court for tortuous inference of its merger agreement. That litigation was recently settled out of court.