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U.S. Re g ula to ry Co nside ra tio ns fo r T ra nsa c tio ns Hart-Sc o tt-Ro dino Pre me rg e r F iling s and CF I US Analysis and F iling s Pre me rg e r No tific a tio ns Ge ne ra lly Cro ss Bo rde r T ra nsa c tio n? Mino

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SLIDE 1

U.S. Re g ula to ry Co nside ra tio ns fo r T ra nsa c tio ns

Hart-Sc o tt-Ro dino Pre me rg e r F iling s and CF I US Analysis and F iling s

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SLIDE 2

Pre me rg e r No tific a tio ns Ge ne ra lly

  • Cro ss Bo rde r T

ra nsa c tio n?

– Mino rity ho lding s? – Re ve nue s?

  • Co nside r fo r timing a nd re so urc e s
  • Critic a l to c o o rdina te no t de le g a te
  • U.S.: HSR Ac t (size o f the tra nsa c tio n)
  • E

U a nd it’ s me mb e r sta te s

  • Bra zil
  • China a nd I

ndia

  • Ove r 170 jurisdic tio ns (Cypre ss!)
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SLIDE 3

Ha rt-Sc o tt-Ro dino Ac t

  • Ha rt-Sc o tt-Ro dino Ac t o f 1976, a s a me nde d

a nd its rule s a nd re g ula tio ns (“HSR Ac t”)

  • Purpo se a nd Ra tio na le
  • E

le me nts:

– F

T C a nd DOJ ro le s;

– T

hre sho lds a nd E xe mptio ns;

– Stra te g y a nd T

iming ;

– Gun Jumping ; – F

iling info rma tio n a nd fe e s;

– E

nfo rc e me nt.

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SLIDE 4

Purpo se a nd Ra tio na l o f HSR Ac t

  • Give s Re g ula to ry Ag e nc ie s 30 da ys to re vie w fo r

a ntic o mpe titive e ffe c ts prio r to the c o nsumma tio n o f a c q uisitio n o r me rg e r;

  • Ame ndme nt to the Cla yto n Ac t in 1976
  • Ve ry diffic ult to e nfo rc e a fte r a me rg e r
  • Po we r o f I

njunc tio n to pre ve nt me rg e r

  • Ab ility to re fo rm the tra nsa c tio n to ma ke it le ss

a ntic o mpe titive

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SLIDE 5

HSR Ag e nc ie s: DOJ a nd F T C

  • Ro le s o f the Ag e nc ie s invo lve d with

HSR

  • Pre me rg e r No tific a tio n Offic e o f the

F e de ra l T ra de Co mmissio n

  • Cle a ra nc e Be twe e n Ag e nc ie s fo r

sub sta ntive re vie w

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SLIDE 6

HSR T e rms a nd T hre sho lds

  • Ac q uiring a nd Ac q uire d Pe rso ns: Ultima te

Pa re nt E ntitie s a nd Asso c ia te s

  • Co nc e pt o f “c o ntro l”
  • Co mme rc e T

e st

  • Size o f the T

ra nsa c tio n T e st

– Asse t v. Vo ting Se c uritie s – No n Co rpo ra te inte re sts – Priva te E

q uity F unds a nd Ma ste r Ge ne ra l Pa rtne rships

  • Size o f the Pa rtie s T

e st

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SLIDE 7

HSR E xe mptio ns

  • “F
  • re ig n Ac q uisitio n” o f no n US Asse ts
  • F
  • re ig n Ac q uisitio n o f vo ting se c uritie s o f no n-US

issue r

  • Unde ve lo pe d re a l e sta te ;
  • “L
  • o k thro ug h” e xe mptio n;
  • F
  • rma tio n e xe mptio ns.
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SLIDE 8

HSR Stra te g y a nd T iming

  • HSR Wa iting Pe rio d
  • E

a rly T e rmina tio n

  • Ag e nc y Re vie w
  • I

nfo rma tio na l Re q ue sts

  • Pull a nd Re file
  • Pre e mptive Re vie w
  • Se c o nd Re q ue sts
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SLIDE 9

Co nside ra tio ns b e fo re filing HSR

  • Sub sta ntive Antitrust T

rust Re vie w

– Unde rsta nd if the re ’ s a pro b le m b e fo re

yo u file

– Stra te g y o ptio ns

  • E

xpe rt he lp?

  • T

iming I ssue s

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SLIDE 10

Gun Jumping a nd Spill Ove r E ffe c ts

  • Co nc e pt: no me rg ing until a fte r HSR pe rio d

e xpire s

  • Pro vide g uide line s to a ll princ ipa ls wo rking o n

the me rg e r

  • Due Dilig e nc e issue s
  • I

nte g ra tio n issue s

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SLIDE 11

HSR F iling a nd F e e s

  • Pre pa ra tio n o f the HSR F
  • rm

– Do c ume nts re q uire d – CF

O invo lve me nt

– 2 we e ks to 2 mo nths

  • HSR filing F

e e s – $45,000 -- $280,000

  • All Pa rtie s F

ile

  • HSR Re vie w Pro c e ss
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SLIDE 12

HSR E nfo rc e me nt

  • F

a ilure to F ile (Bill Ga te s): $16,000/ da y fine

  • F

a ilure to pro duc e a ll re le va nt do c ume nts

  • Gun Jumping
  • Antic o mpe titive T

ra nsa c tio n (Who le F

  • o ds e xa mple )
  • Me rg e rs re me die s
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SLIDE 13

E xo n-F lo rio Ame ndme nt

  • Purpo se : to re vie w tra nsa c tio ns fo r issue s o f

Na tio na l se c urity prio r to c o nsumma tio n.

  • Histo ry a nd b a c kg ro und o f e nfo rc e me nt
  • E

le me nts:

– T

ra nsa c tio n invo lving c ha ng e o f c o ntro l

– I

mplic a ting Na tio na l Se c urity

– 30 da y wa iting pe rio d – Jo int F

iling

– Stra te g y a nd c o nside ra tio ns

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SLIDE 14

Co mpo sitio n o f CF I US

  • T

he me mb e rs o f CF I US inc lude the he a ds o f the fo llo wing de pa rtme nts a nd o ffic e s: 1. De pa rtme nt o f the T re a sury (c ha ir) 2. De pa rtme nt o f Justic e 3. De pa rtme nt o f Ho me la nd Se c urity 4. De pa rtme nt o f Co mme rc e 5. De pa rtme nt o f De fe nse 6. De pa rtme nt o f Sta te 7. De pa rtme nt o f E ne rg y 8. Offic e o f the U.S. T ra de Re pre se nta tive 9. Offic e o f Sc ie nc e & T e c hno lo g y Po lic y

  • T

he fo llo wing o ffic e s a lso o b se rve a nd, a s a ppro pria te , pa rtic ipa te in CF I US’ s a c tivitie s: 1. Offic e o f Ma na g e me nt & Budg e t 2. Co unc il o f E c o no mic Adviso rs 3. Na tio na l Se c urity Co unc il 4. Na tio na l E c o no mic Co unc il 5. Ho me la nd Se c urity Co unc il

–

T he Dire c to r o f Na tio na l I nte llig e nc e a nd the Se c re ta ry o f L a b o r a re no n-vo ting , e x-

  • ffic io me mb e rs o f CF

I US with ro le s a s de fine d b y sta tute a nd re g ula tio n.

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SLIDE 15

E xo n-F lo rio Ame ndme nt

  • E

na c te d in 1988 a s a n a me ndme nt to the De fe nse Pro duc tio n Ac t o f 1950

  • Autho rize the pre side nt to inve stig a te fo re ig n

a c q uisitio ns, me rg e rs a nd ta ke o ve rs o f o r inve stme nts in US Co mpa ny fro m a na tio na l se c urity pre spe c tive

  • Pre side nt ma y pro hib it a tra nsa c tio n tha t

a ppe a rs to thre a te n na tio na l se c urity

  • Pre side nt de le g a te d a utho rity to CF

I US

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SLIDE 16

Whe n to Ma ke CF I US F iling

  • CF

I US F iling is “vo lunta ry” – i.e ., no pe na lty fo r fa ilure to file .

  • CF

I US c a n re vie w a t a ny time witho ut filing a nd ma y de la y tra nsa c tio n.

  • I

f it is a “c o ve re d” tra nsa c tio n a nd

  • Ma y b e sub je c t to inve stig a tio n.
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SLIDE 17

Whe n to ma ke CF I US filing

  • If the r

e is “for e ign c ontr

  • l” of any pe r

son e ngage d in U.S. inte r state c omme r c e ; and

– Co nc e pt o f “c o ntro l” is no t fixe d (c a n b e a s little

a s 10%);

– E

ve n if U.S. e ntity is a lre a dy fo re ig n o wne d.

– I

nc lude s jo int ve nture s a nd so me inve stme nts.

  • If a for

e ign e ntity will c ontr

  • l str

ate gic r e sour c e

  • r

affe c t national se c ur ity

  • I

mpa irme nt o f na tio na l se c urity ha s c ha ng e d sinc e 1988 a nd is so me wha t c o ntro ve rsia l

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SLIDE 18

E a rly E nfo rc e me nt

  • 1990: Pre s Bush b lo c ke d China Na tio na l

Ae ro -T e c hno lo g y I mpo rt & E xpe ro t fro m a c q uiring Ma mc o Mfg ing ;

  • By 1991, o nly me rg e r b lo c ke d o ut o f 500.
  • Ame ndme nts to stre ng the n did no t pa ss.
  • Po st 9/ 11

– Of six he ig hte n re vie w tra nsa c tio n b e twe e n 2003

a nd 2005, two we re Chine se

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SLIDE 19

Po st 9/ 11 CF I US Re vie w

  • CNOOC’ s Pro po se d Ac q uisitio n o f Uno c a l
  • June 23, 2004, $18.5 b illio n b id fo r

Uno c a l

  • Bid o ve r Che vro n’ s $16.4 b id
  • F

ile d a unila te ra l CF I US filing b ut CF I US ne ve r re vie we d

  • Na tio na l Se c urity issue ?
  • No spe c ia l te c hno lo g y
  • Po lic ita l issue s: no re c ipro c ity (if a US c o mpa ny trie d to b uy

a Chine se o il c o mpa ny)

  • Ac c e ss to c he a p c a pita l (via Chine se g o v’ t) so b id unfa ir
  • Re pub lic a n pro te c tio nists/ HR 344 pa sse d
  • CNOOC withdre w its o ffe r
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SLIDE 20

CF I US Re vie w o f Dub a i Po rts Wo rld

  • DPW, o wne d b y Dub a i Go v’ t, purpo se to

a c q uire a British firm tha t he ld 6 US po rts fo r $6.8 b illio n in 2006;

  • F

ile d fo r a nd re c e ive d CF I US a ppro va l;

  • T

he n Co ng re ss le a rne d o f the tra nsa c tio n, wa s ho stile in spite o f sa fe ty me c ha nisms in pla c e ;

  • DPW dive ste d the six po rts.
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SLIDE 21

Po st Dub a i Po rts CF I US

  • We a ke n c re dib ility o f CF

I US

  • Re sult is he ig hte ne d re vie w
  • 2008 Guide line s (E

xe c . Orde r 13456) e xpa nde d CF I US me mb e rs

  • 2008 re q uire s se c o nd-sta g e

inve stig a tio n fo r fo re ig n g o v’ ts o r c ritic a l infra struc ture .

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SLIDE 22

CF I US He ig hte ne d Sc rutiny

  • 2009: Chine se mining a c q uisitio n a b a ndo ne d in

Ne va da ;

  • 2011 Hua we i a c q uisitio n o f 3L

e a f Syste ms (No filing )a nd the n a b a ndo ne d;

  • Se pte mb e r 2012 b lo c ks Ra lls fro m a c q uiring Wind

F a rm Pro je c t

– Re tro a c tive re vie w – Ne a r Na vy we a po ns syste ms tra ining Bo a rdma n OR

  • 2013: CF

I US c le a re d Wa nxia ng Gro up’ s a c q uisitio n o f A123 Syste ms – b a tte ry ma ke r)

– Dive ste d milita ry a nd g o v’ t a sse ts – $257 millio n a c q uisitio n pric e

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SLIDE 23

CF I US L e sso ns

  • I

nc re a se in F iling s (20% inc re a se in 2011 o ve r 2010)

  • Mo re he ig hte n sc rutiny (37%) in 2011;
  • Co mpa re to 4% in 2007;
  • Do n’ t a vo id filing (Hua we i);
  • Ha ve a pla n in pla c e to a ddre ss c o nc e rns;
  • Me e t with CF

I US me mb e rs;

  • Dista nc e fro m g o v’ t e ntity.
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SLIDE 24